Debenhams to drive cost cuts after issuing profit warning

Tuesday, June 19, 2018

Debenhams is to drive through further cost cuts after issuing a fresh profit warning on the back of market weakness and competitor discounting.

The department store chain said trading was "below plan" in May and early June, despite weak comparatives, forcing it to "reassess" expectations for the remainder of the year.

The retailer now expects full-year pre-tax profits to come in between £35 million and £40 million, down from previous estimates of £50.3 million.

It means further cost cuts are on the horizon, which Debenhams said will be focused on "self-help and prioritising cash generation".

"We also intend to conduct a strategic review of non-core assets, aiming to focus investment behind our strategy," it added.

The company stopped short of announcing store closures, but, as previously announced, it is still assessing whether to shutter 10 of its outlets over the next five years, a spokesman said.

The footprint of up to 30 of its stores may also be reduced, while the leases of 25 locations may be renegotiated as they come up for renewal over the next five years.

The spokesman said no job cuts are currently planned.

Chief executive Sergio Bucher said: "It is well-documented that these are exceptionally difficult times in UK retail and our trading performance in this quarter reflects that.

"We don't see these conditions changing in the near future and, because it is our priority to maintain a robust balance sheet, we are making very careful choices about how we deploy capital."

However, the retail boss said he was seeing "clear evidence of progress" in online sales while customers were responding "positively" to product improvements.

"We have also put in place a leaner operational structure and made a number of important hires so that we are well-equipped to navigate the market turbulence."

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