Debenhams posts Christmas sales rise but margins suffer

The department store group delivered a 4.9% increase in like-for-like sales in the four weeks to January 10, when group gross transaction value advanced 5.9%.

But although Debenhams was on promotion for 10 days fewer than the previous year and achieved a 12.1% increase in full price sell-through of own-bought lines, gross margin suffered.

That was a result of higher sales of lower margin categories such as beauty and turbulent fashion market conditions as retailers discounted following the mild autumn.

On the unseasonably warm weather, Debenhams chief executive Michael Sharp said: “As lots of other retailers have reported, clothing has been the most challenging part of the marketplace and that’s related to the weather conditions….but we managed it well. We couldn’t be immune to [what was happening in] the marketplace.”

Debenhams now expects gross margin for the year overall to be at the lower end of guidance and up by between 10 and 40 basis points. Full-year profit guidance remained unchanged and an increase of between 2% and 4% is anticipated.

In the 19 weeks to January 10 Debenhams like-for-likes slipped 0.8% while gross transaction value was up 0.2%.

The retailer said its multichannel operations stood up to the challenge of the Christmas season and it had a “good” Black Friday.

Group online sales climbed 28.9% over the four week period and 6% over 19 weeks.

Debenhams reported: “Demand for click and collect increased during the Christmas period and in the final days peaked at 38% of online orders.

“Our distribution centres performed well throughout, particularly in relation to next day delivery to home and next day click and collect.”

Sharp said: “I am pleased with our performance in the critical Christmas trading weeks, driven by our strength in a diverse range of product categories and a strong marketing campaign focused on gifting.

“Our performance steadily improved following the well documented challenges in the clothing market in the autumn. 

“We now have a competitive online proposition with next day delivery to home and next day click and collect, which customers took full advantage of and which performed well over Christmas.”