Debenhams warns on profit after sales are hit by January snow

Shares in High Street retailer Debenhams plunged nearly 10 per cent on Monday after the company issued a profit warning after admitting its UK business had been 'severely disrupted' by the snow in the latter part of January.

The group said that whilst group like-for-like sales grew by around 3.0% for the 26 weeks to March 2nd, during the snow-affected period of January 14th-27th UK like-for-like sales were down by around 10%.

It warned investors that additional promotional events in February failed to full recover the losses and said the sales generated were mainly in lower margin clearance lines.

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As a result, the gross margin for the first half will be around 20 basis points lower than last year and for the year is now more likely to be flat than the 10 basis points increase previously guided to.

As such, profit before tax is expected to be £120m for the financial year.

Looking ahead, the company said it enters the second half with a strong spring/summer collection and stocks at planned levels and said it believes forecasts for the period are "robust", and it will continue to grow sales as expected.

Michael Sharp, the Chief Executive of Debenhams, said: "Whilst the impact of the snow on the outcome for the first half is disappointing, it is now behind us and sales volumes have recovered. We are confident in our spring/summer ranges and that we can grow sales in the second half.

"Our strategy to build a leading international, multi-channel brand remains on track and we continue to focus on the four pillars of the strategy and investing in our business for long-term, sustainable growth."

The group said there was no change to its full year guidance on costs, capex, dividends and the share buyback programme.

The share price fell 10.94% to 84.25p by 08:50 Monday.

NR