* Jan 14-27 like-for-like sales down 10 pct
* 26 weeks to March 2 like-for-like sales up 3 pct
* Sees H1 pretax profit of 120 mln pounds vs forecast 130
* CEO says company "in good shape" despite warning
* Shares down 11 percent
By James Davey
LONDON, March 4 British department store group
Debenhams said on Monday it expected profits in the
first half of its 2012-13 year to fall about eight percent short
of forecasts after a blanket of snow smothered January sales.
Shares in Britain's second-largest department store group
fell 11 percent to 84 pence by 1242 GMT after it said in an
unscheduled trading update that it expected pretax profit for
the 26 weeks to March 2 to be around 120 million pounds ($180
"What you have to remember is that the snow fell across the
whole country, the trading period that was disrupted was smack
bang in the middle of the January sale and it covered the month
end of January which is a strong trading period," Chief
Executive Michael Sharp told Reuters.
With Britain teetering on a third recession in four years
retailers have been finding the going tough as consumers fret
over job security, a squeeze on incomes and government cuts.
Debenhams did have a decent Christmas and said it was
trading well in January before the first significant fall of
snow in almost a year hit the country. Analysts had forecast a
consensus pretax profit of about 130 million pounds.
In an attempt to recover the lost sales Debenhams introduced
additional promotional events in February, focused on
Valentine's Day, the school half-term holiday and the month end.
These drove incremental sales but did not fully recover
those lost to the snow and came at a cost to profit margins.
The firm said that while sales at stores open over a year
grew by about 3 percent in the 26 weeks to March 2, during the
snow-affected period of Jan. 14-27 UK like-for-like sales fell
about 10 percent.
Debenhams said gross margin for the first half will be about
20 basis points lower than last year, while for the full-year it
was more likely to be flat, rather than the 10 basis points
increase guided to in the firm's Jan. 8 update.
"Our sense had been that weekly volatility has been a fact
of life and that, with Christmas and the early part of the
January sales out of the way, the sector would navigate the snow
without profit warnings," said Sanjay Vidyarthi, analyst at
Espirito Santo Investment Bank.
Weekly data from rival and British department store leader
John Lewis has shown it coped much better with the
snow, recording total sales rises of 6.7 percent and 9.8 percent
in the weeks to Jan. 19 and Jan. 26 respectively.
Sharp suggested Debenhams was disproportionately impacted
because its over 150 stores are nationwide, whereas John Lewis
is south east biased. Also Debenhams' online presence is less
significant, with its stores providing 88 percent of total
sales, while for John Lewis it is about 75 percent.
The CEO said the firm had won market share in the first half
and expected sales to grow in the second half, on the back of a
strong spring/summer collection and the benefits of refurbished
stores coming through.
"We're in good shape, I'm absolutely clear that the issue
that's affected us is directly attributable to snow," he said.
Debenhams' full year guidance on costs, capex, dividends and
its share buyback programme was maintained. Shares had been up
28 percent over the last year before Monday's profit warning.
Panmure Gordon analyst Jean Roche cut her full year pretax
profit forecast to 156.4 million pounds from 166.4 million
pounds and her price target to 104 pence from 112 pence.
Analysts said investors were reading across to Marks &
Spencer, Britain's biggest clothing retailer, whose shares were
down 2 percent.
"We sense that M&S will have continued to have lost market
share but possibly held margins," said Vidyarthi.