UK: Debenhams hails best ever December sales, but discounting erodes margins
DEPARTMENT stores group Debenhams today hailed its best ever December performance after ramping up pre-Christmas discounting to attract cost-conscious shoppers.
The group, which has 155 UK stores and 73 overseas outlets, cut prices by up to 50% in one-day promotions on some products in what chief executive Michael Sharp said was the most competitive Christmas in his 37-year career in retail.
He said shoppers were more “canny” and left shopping until much later this year in the hope of picking up bargains ahead of Christmas as well as during the traditional sale period.
Debenhams saw sales in the five weeks to January 5 rise 5% on a like-for-like basis after a record December, helping comparable sales in the first 18 weeks of its financial year lift 2.9%.
But the group sacrificed margins for sales and said the move to discount earlier in the season was expected to hit profit margins for the year to September.
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Mr Sharp said consumer confidence would remain subdued over the year ahead.
“Whilst consumers have become acclimatised to the new economic reality, we don’t anticipate a significant change in consumer confidence in the remainder of the year,” he said.
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Debenhams said promotions over the festive period ran for two days longer than the year before as it sought to overcome “extremely challenging” conditions.
Profit margins are now expected to be 0.1% higher over the financial year, half the 0.2% rise previously forecast by the group.
Shares fell more than 5% as the margin blow took the shine off the Christmas sales hike.
Investors were also taking profits after a stellar 2012 for the stock - which rose 95% over the year thanks to a recent sales revival.
Debenhams said trading was helped by a higher-than-expected surge in online sales, up 39% in the 18 weeks and accounting for 12.6% of total revenues.
The group added that its first Christmas advertising campaign for six years was “well received” by customers.
Best-sellers over Christmas included its Jonathan Saunders Edition red coat, which was its fastest-selling coat ever after appearing in the “Christmas Made Fabulous” television adverts.
Julien MacDonald party dresses also sold well, while it said designer lingerie sales were up 14% in the week before Christmas.
“Onesies” were also its best-selling sleepwear, according to the group.