Debenhams must tackle "underperforming" clothing
Debenhams said uncertain trading conditions impacted clothing
Debenhams needs to tackle its underperformance in clothing in order to prevent further market share erosion, according to one analyst, as the UK department store retailer said uncertain trading conditions impacted the third quarter.
For the 15 weeks ended 11 June, like-for-like sales dropped 0.2%. Debenhams said the UK trading environment has been weak since the beginning of the year, particularly in clothing.
Online sales, however, grew 7% against strong comparatives in the quarter. The retailer said it continues to see positive trends in mobile, which now represents over 50% of its UK online orders and strong growth in click & collect, up 19% year-on-year.
For the full year, Debenhams said it now expects gross margin to be flat, versus a previous guidance range of +0bp to +50bp, reflecting a tactical response to more challenging trading conditions in the second half. Profit before tax will be within the range of market forecasts, it said, despite volatility in the trading environment.
CEO Michael Sharp, who will make way for Sergio Bucher in October, said the group's strategy remains unchanged, with progress in improving the service for multichannel customers, and offering a wider choice of products and services in under-optimised space.
"In response to more uncertain trading conditions in this period, particularly in clothing, we have focused on managing stock and margins and generating cash," he added.
Rebecca Marks, analyst at Verdict Retail, noted: "While the new CEO will need to continue to execute the department store's core strategic focuses to mitigate trading ambiguity, Bucher must first tackle the underperformance in clothing to prevent further market share erosion."
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