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Debenhams shares slip amid warnings of 'market volatility'

By Vivian Hendriksz



London - UK high street retailers are facing a drop in their stocks this morning following a bleak trading update from department store group Debenhams. The struggling retailer revealed a 0.9 percent decline in like-for-like sales for the 15 weeks to June 17 amid "market volatility."

In its trading update for the 15 weeks and 41 weeks to June 17, 2017, Debenhams said it anticipated profit before tax for the year to be within the range of market expectations. "However, should current market volatility continue, the outcome could be towards the lower end of the current range," warned the department store. Following its update, shares in Debenhams, which slipped out of the FTSE 250 earlier this month, fell 3.4 percent to its lowest levels since 2009, according to the Financial Times.

Debenhams like-for-like sales increased 1.8 percent during the 41 weeks to June 17. But its like-for-like sales in constant currency for the 15 weeks to June 17 fell 2.4 percent compared to the same period last year and increased by 0.7 percent in the 41 week period. No change was made to its gross margin guidance for the financial year 2017, but Debenhams tightened its guidance on cost growth to 3 percent, increasing 1 percent in constant currency.

Debenhams shares fall following profit warning

The department store stated that the UK trading environment "has been less predictable since Easter" noting that May was a "tough" month for the retail industry. Shares in Next and M&S also fell this morning following Debenhams warning that "volatile" trading may affect its profits. But the retailer remained upbeat in its trading update, noting that its targeted destination categories for beauty, accessories, and food helped "mitigate the impact of a weaker clothing market."

In addition, Debenhams noted that its constant currency performance has improved across its international division and the foreign exchange impact remained "positive" during the period. But results from underlying markets remain mixed, with positive growth in Denmark offset by weaker trading in the Middle East and the Republic of Ireland.

"As industry data has confirmed, May was a tough month for retailers and we continue to see volatility in trading week to week," commented Sergio Bucher, CEO of Debenhams. "As a result, we are focused on delivering cost control and self-help through our "Fix the Basics" plan. We continue to build good foundations for longer-term growth at Debenhams by becoming a Destination, Digital and Different."

Bucher previously revealed Debenhams new strategy this April, which sees the department store group focusing on experiential shopping, digital growth, and efficiency by streamlining and simplifying its businesses. "We are making progress in implementing our exciting and ambitious new strategy, Debenhams Redesigned, which will make us the destination for Social Shopping," he added.

"We have already started to deliver changes that will improve service for our customers and simplify and focus our operations.

Photo: Courtesy of Debenhams