Poor UK sales hit Debenhams shares

The performance of its Irish stores was one of the only bright notes for Debenhams as it slashed its profit forecast following a poor Christmas period in the UK.

Poor UK sales hit Debenhams shares

The performance of its Irish stores was one of the only bright notes for Debenhams as it slashed its profit forecast following a poor Christmas period in the UK.

The shares, which at one stage plunged by 24%, later rallied to close 15% lower in the session.

The department store group revised its forecast after it was forced to cut prices in the UK to drive sales of Christmas gifts, illustrating the challenges facing some of UK’s best-known retailers.

Shares in the 240-year-old company were down more than 14%, or 5.24p to 30.34p, after the mid-market retailer rushed out sales figures a week earlier than expected.

However, its 11 stores in the Republic delivered positive like-for-like growth during the 17 weeks until the end of December, Debenhams said, along with its Magasin du Nord business in Denmark.

Its Irish sales were £147.5m (€166.2m) in the 12 months to the end of August last year, having benefited from restructuring under examinership, the firm said in October. Debenhams performance in the Christmas run-up underlines the threat to traditional British retailers from online competition, a decline in demand for clothing and pressure on UK consumer spending.

Chief executive Sergio Bucher said UK customers had “come late to Christmas”, and when they did start shopping its gifts were not special enough to encourage them to buy without discounts.

After John Lewis, Debenhams is second largest UK department stores group by its value of sales. John Lewis said its sales in the week before Christmas rose almost 9%. However, Christmas was a boon for German discounter Aldi in Ireland and the UK, with a 15% rise in December sales from December 2016, bringing its annual Irish and UK sales to over £10bn for the first time.

Aldi added 76 stores in 2017, bringing the total to 762. It plans 1,000 stores in the UK by 2022, with plans to open a further 70 stores this year.

Fashions retailer Next reported stronger than expected Christmas sales. Its shares fell 1% in the session. The firm said a 1.5% increase in Christmas sales was partly “down to much colder weather in the run-up to Christmas”.

British consumers increased their borrowing by the smallest amount since mid-2015 in the three months to November, suggesting households are slowly reining in spending, Bank of England figures showed.

UK mortgage lender Nationwide said UK house prices last year grew at their slowest pace since 2012 and fell in London for the first time since 2009.

Additional reporting Reuters

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