Debenhams sees profits plunge after being bitten by Beast from the East
Debenhams in Norwich. Picture: DENISE BRADLEY - Credit: Copyright: Archant 2016
Debenhams saw its half year profits plunge nearly 85% after extreme weather brought in by the Beast from the East gouged earnings.
The retailer said its bottom line pre-tax profits fell from £87.8m to just £13.5m over the 26 weeks to March 3, having taken a major hit during the final days of the trading period when bad weather forced Debenhams to temporarily close around 100 stores.
That was much worse than analyst forecasts, which had placed pre-tax profits at around £44 million.
Debenhams also blamed a 'disappointing Christmas season' for increasing competitor discounting and ultimately hitting underlying earnings for the UK, which fell 39.3% over the half year.
Like-for-like sales, meanwhile, dropped 2.2%, with the retailer citing a 'challenging UK market background.'
Difficult trading over Christmas prompted a profit warning by the retailer back in January, sending shares down 20%.
It is now forecasting full year pre-tax profits at the lower end of the current range of forecasts of between £50m to £61m.
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Chief executive Sergio Bucher said: 'It has not been an easy first half and the extreme weather in the final week of the half had a material impact on our results.
'But I am hugely encouraged by the progress we are making to transform Debenhams for our customers.'
He added: 'We are holding share in a difficult fashion market, and in other categories such as furniture, exciting new partnerships have the potential to transform our offer.
'We approach the remainder of the year mindful of the very challenging market conditions, but with confidence that we have a strong team and the right plan to navigate them and return Debenhams to profitable growth.'
Debenhams and other retailers are facing severe structural pressures and the firm has started shifting its focus away from fashion towards beauty products and gifts.
Under chief executive Mr Bucher, who joined the retailer in 2016, the chain has also been refurbishing stores as part of his turnaround strategy.
The retailer also announced on Thursday that its chief financial officer Matt Smith is leaving to take up a post as finance director at Selfridges.
A search for his replacement is currently under way.
