The release of Debenhams’ latest trading update saw the retailer’s shares drop by 5%, with figures highlighting the tough conditions the brand is currently up against.
The figures released for the 15 and 41 weeks to June 11 showed the group’s gross transaction value rise by 0.5%, with like-for like-sales across stores down 0.2%.
While health and beauty sales have seen growth, Debenhams describes the current traditions as tough, especially in the clothing sector.
Speaking to The Guardian, the department store chain said the tough trading backdrop was partly due to the shift in spending habits, as people choose to spend more money on holidays, new cars and eating out, and less on clothing.
In a bid to combat this slump, the group has upped its promotional activity in womenswear to try and shift some seasonal stock, which is in line with the brand’s plans.
Online sales still looked strong and grew 7%, with over half of all online orders coming from mobile devices.
Financial services company Hargreaves Lansdown said Debenhams has followed in the footsteps of larger rivals, Next and Marks & Spencer, after posting positive trading updates earlier this year.
“Debenhams has looked to move away from the famous ‘Blue Cross’ discount model, in the hope of boosting profit margins. However, getting shoppers to spend on the high street is difficult enough just now, and Debenhams have found it even harder when their customers are not getting the discounts they are used to. Consequently, Debenhams have been forced to get the Blue Cross stickers out again. Despite their best intentions, it looks like the group has not yet shed its reputation as a serial discounter,” the company added.
“The group has other challenges too, not least optimising the space within their large store estate. Although debt is falling, overall levels are still above targets , and the group has significant leasehold obligations. Debenhams is, therefore, one of the lowest-rated retailers that we cover.
“However, in recent times outgoing CEO Michael Sharp has made some useful strategic calls, in particular to hold lower levels of seasonal stock, and to invest in a multi-channel retail strategy. Progress in online and mobile has been strong, and these now represent 15% of total revenue. With Sergio Bucher of Amazon’s European fashion team taking over, the focus on digital and online looks set to continue, but analysts will need to wait until later in the year to hear his plans in full.”