Prolific promotions not enough to deliver a positive Christmas for Debenhams, say analysts

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Following today’s release of Debenhams figures for the 2018 Christmas period, Sofie Willmott, senior retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘Despite heavy discounting across the peak Christmas period Debenhams has reported dismal results this morning in stark contrast to its price-matching competitor John Lewis, which delivered growth in a challenging market (gross sales for the seven weeks to 5 January 2019 rose 2.5%). Nevertheless Debenhams’ Christmas performance showed some improvement on disastrous September–November trading, driven by its online channel with group digital sales up 6.0% over the six weeks against strong comparatives last year. Unlike its midmarket competitor Next, decent online sales are not enough to prop up Debenhams’ overall figures as underperforming stores account for the bulk of turnover. Although Debenhams is striving for digital to account for 30% of its business and upcoming store closures will increase reliance on its online channel, it still has a long way to go – only 18.3% of group GTV was generated online in FY2017/18.

“Following a financial year littered with profit warnings, Debenhams has managed to escape another caution so far in FY2018/19. The retailer expects FY profit before tax to come through in line with analyst expectations (£8.2m, with a range of -£10m to £30m) thanks to cost savings with a previously announced annualised cost saving forecast of £50m being adjusted to £80m following ‘additional opportunities’ being identified. Although carefully controlled costs are vital to protect profit, ongoing investment is also essential to reverse the trend of declining GTV.

“Debenhams’ refreshed branding has been clearly visible in recent months across various customer touch points, including its Christmas advert, website and emails, and its revamped stores are outperforming. Given that physical locations are the main contributor to turnover, it must rapidly roll out its new concept in order to ensure consistency and to drive home its more modern and relevant image to consumers, drawing shoppers back to the brand.”