Debenhams' sales growth slows in volatile UK market

Thu Jun 27, 2013 6:06am EDT
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By James Davey

LONDON (Reuters) - Debenhams (DEB.L: Quote), Britain's No. 2 department store group, said on Thursday a volatile trading climate and unhelpful spring weather contributed to a slowdown in third quarter sales growth, which fell-short of analysts' forecasts.

The company, like many other British retailers, is finding the going tough as consumers, whose spending generates about two thirds of Britain's gross domestic product, fret over job security and a squeeze on incomes.

Debenhams' sales at stores open over a year were flat in the 16 weeks to June 22 - a period which includes its fiscal third quarter. That compares with a first-half like-for-like sales rise of 3.1 percent and analyst forecasts for growth of about 2 percent.

"Any retailer that you speak to will tell you that it's not easy out there ... I think in the context of the market backdrop these are robust results," CEO Michael Sharp told reporters.

The 200-year-old department store group, which trails rival John Lewis JLP.UL by annual sales, said it had coped well with the conditions and was comfortable with market expectations for pretax profit in 2013-14, thanks to control over gross margins and more cost savings.

Shares in the firm, down 23 percent since the start of the year, were up 1.75 pence at 92.6 pence at 0912 GMT, valuing the business at 1.13 billion pounds ($1.73 billion).

"This is not a high quality update, but we think that the market had been expecting another warning," said Sanjay Vidyarthi, analyst at Espirito Santo Investment Bank.

Forecasts had been cut after a profit warning in March that was blamed on January snow.   Continued...

People rush past Debenhams department store on Oxford Street, in central London, January 10th 2011. REUTERS/Ki Price