Debenhams slows sales decline but has concerns around profit

Debenhams reported a slowing in its sales decline in an update to the market on Tuesday, as the struggling department store chain worked to turn around its fortunes, though it did signal doubts over its profit expectations.

The London-listed firm had said on 10 January that in the first 18 weeks of its financial year, group gross transaction value declined by 5.6%, with the like-for-like figure down 5.7%.

Of that, the UK business was down 6.2% at the time, with its international operations falling 3.5%, while digital sales grew 4.6%.

In the following eight weeks, group gross transaction value had moderated its decline to 5.0%, with the like-for-like decline narrowing to 4.6%.

Overall, for the 26 weeks of the first half ended 2 March, group gross transaction value had declined 5.4%, or by 5.3% on a like-for-like basis.

The UK business value declines 6.0%, with international operations down 2.3%.

Digital sales grew by 2.0% across the period.

Debenhams said its annualised £80m cost saving programme was on track, with the board expecting the first ranges resulting from its sourcing partnership with Li & Fung to be in stores in the current season.

Further to its announcement of 12 February regarding the additional £40m bridge facility, the company said discussions with stakeholders had now progressed to include options to restructure its balance sheet in order to address its future funding requirements.

Those were continuing “constructively”, the directors said.

While trading headwinds had moderated in recent weeks, the company said the process was likely to be disruptive to its business in the coming months.

Taken together with macroeconomic uncertainties and increased financing costs as a result of additional working capital needs, that meant that the group's statement made on 10 January - that it was “on track to deliver current year profits in line with market expectations” - was no longer valid.

The board said it would provide a further update with its interim results announcement.

“We are making good progress with our stakeholder discussions to put the business on a firm footing for the future,” said Debenhams chief executive officer Sergio Bucher.

“We still expect that this process will lead to around 50 stores closing in the medium term.”

Bucher said the company’s priority was to secure the best outcome for the business and all of its stakeholders, while minimising the number of store closures and job losses.

“To do this, as we have said before, we will need the support of both landlords and local authorities to address our rents, rates and lease commitments.

“I would like to thank our staff - and all our stakeholders - for their continued support through this period, as we work to deliver a sustainable future for the company.”