This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.guardian.co.uk/business/2013/mar/04/debenhams-shares-profits-warning-snow

The article has changed 5 times. There is an RSS feed of changes available.

Version 1 Version 2
Debenhams shares crash on profits warning Debenhams shares crash on profits warning
(about 2 hours later)
Shares in Debenhams tumbled 12% as it issued a surprise profits warning, blaming the snow that blanketed Britain in January. Shares in Debenhams tumbled 10% as it issued a surprise profits warning, blaming the snow that blanketed Britain in January.
The company said like-for-like sales dropped 10% between 14 and 27 January when "the UK business was severely disrupted by the snow which fell across the country". Its shares dropped to 85p in early trading.The company said like-for-like sales dropped 10% between 14 and 27 January when "the UK business was severely disrupted by the snow which fell across the country". Its shares dropped to 85p in early trading.
This may be the first of a series of bad results from retailers hit by the snow. Debenhams pointed to data from accountants BDO, which showed like-for-like sales across fashion retailers dropped by an average of 10.5% over the two-week period. This may be the first of a series of bad results from retailers hit by the snow. Debenhams pointed to data from accountants BDO, which showed like-for-like sales across fashion retailers dropped by an average of 10.5% over the two-week period. But analysts said Debenhams appeared to be among the worst hit, as it failed to recoup sales in the following weeks.
Debenhams, which is Britain's second-largest department store chain, launched sales for Valentine's Day, half-term and end of the month to try to make up for the dire performance, but said in a statement: "Although these events did drive some incremental sales they did not fully recover those lost in January." Britain's second-largest department store chain launched sales for Valentine's Day, half-term and the end of the month to try to make up for the dire performance, but said it failed to fully recover sales lost in January. As a result, it expects pre-tax profits for the first half to come in at £120m, rather than the £130m analysts had pencilled in, and more than 5% lower than in the first half last year. Like-for-like sales for the six months to 2 March rose by 3%.
As a result, it expects pre-tax profits for the first half to come in at £120m, rather than the £130m analysts had pencilled in, and more than 5% lower than the first half last year. Like-for-like sales for the six months to 2 March rose by 3%. Chief executive Michael Sharp said the snow fell during the key January sales period, meaning the store still had leftover Christmas stock to shift after the thaw. "That was a period where customers were still looking to buy bargains. When you get into February, people are starting to look for new products." Any remaining stock therefore needs to come with even deeper discounts, he said, which hit margins.
Debenhams said the products it did manage to shift were in "lower margin clearance lines", meaning gross margin for the first half will be about 0.2% lower than in the same period last year, and would be flat for the full year, rather than rising by 0.1%. Gross margins for the first half will be around 0.2% lower than in the same period last year and will be flat for the full year, rather than rising by 0.1% as previously forecast.
That will worry analysts who said Debenhams led the aggressive sales over Christmas, sacrificing profits in order to shift stock. Kate Calvert of Seymour Pierce said at the time: "[Debenhams] have got a bit too hooked on the promotional drug." That will worry analysts who say Debenhams have been buying too much stock and discounting heavily to clear it. Kate Calvert of Seymour Pierce said: "They are hooked on promotions. Their customers know there is no point paying full price for things." But Sharp defended the store's strategy. "Customers like our promotions, they feel they offer genuine value for money and that is one of the reasons they shop with us."
Michael Sharp, the Debenhams chief executive, said on Monday: "Whilst the impact of the snow on the outcome for the first half is disappointing, it is now behind us and sales volumes have recovered. We are confident in our spring/summer ranges and that we can grow sales in the second half." The company will publish its first half results on 18 April. Debenhams is aiming for 4% growth in like-for-like sales in the second half and is thought to be buying enough stock to meet that target. Calvert said: "That seems a very aggressive trading strategy in the current climate."
Sharp said conditions on the high street would continue to be difficult this year. "The reality of life is we are bumping along the bottom. We've talked in the past about customers becoming acclimatised to the new economic reality. We are not expecting any bounce-back this year."
But he was confident Debenhams could grow sales in the second half. "The disappointing factor is the impact of snow. It's quite clear what the problem was and it's now behind us." The company will publish its first half results on 18 April.