Debenhams’ Sales Growth Slows

Debenhams | Source: Reuters

LONDON, United Kingdom — Debenhams, Britain’s No. 2 department store group, posted slower sales growth for its latest trading period as unhelpful weather and a tough consumer environment took their toll.

But the 200-year-old firm, which trails John Lewis by annual sales, did say on Thursday it was comfortable with the market’s current expectations for pretax profit in 2013-14, reflecting a strong focus on stocks, margins and costs.

Analysts’ consensus is a pretax profit of around 153 million pounds ($235 million).

Debenhams said sales at stores open over a year were flat in the 16 weeks to June 22 – a period which includes its fiscal third quarter.

That outcome compares with a first half like-for-like sales rise of 3.1 percent and was below analyst forecasts of growth of about 2 percent.

“We consider this to be a robust performance in a market which has been impacted by the weak consumer environment as well as poor spring weather which dampened demand for new season ranges,” the firm said.

It highlighted market share gains in clothing, beauty and home and a 40 percent rise in online sales.

In line with previous guidance Debenhams said gross margin was expected to be flat for the full 2013-14 year.

European fashion retailers have suffered so far this year as a squeeze on disposable incomes has been exacerbated by an unusually cold spring and early summer.

Earlier this month global leader Spain’s Inditex , which owns the Zara chain, posted its weakest quarterly growth in net profit in four years, while No. 2 Sweden’s H&M missed forecasts for second quarter net sales.

However, there are still winners in Britain despite the tough trading conditions. John Lewis’s total sales were up 7.9 percent in the 20 weeks to June 15, while online fashion retailer ASOS recently reported a 45 percent jump in third quarter sales.

Debenhams had issued a profit warning in March, blaming snow in January for a drop in sales that it failed to recover fully in February despite additional promotions and discounts.

Shares in the firm closed Wednesday at 88.5 pence, valuing the business at 1.1 billion pounds. ($1 = 0.6520 British pounds)

By: James Davey; Editors: Neil Maidment and Jane Merriman