Debenhams and M&S report festive sales slump
Written by Hannah McGrath
Debenhams and Marks & Spencer have reported a slump in sales over the Christmas period as shoppers hunting for bargains forced retailers into a discounting war.
The results from the retailers, considered bellwethers of the health of the High Street, were marginally below expectations but did not prompt either to revise down their full-year profit forecasts.
It came as the latest British Retail Consortium (BRC) and KPMG figures showed sales growth grinding to halt in December, compared to a rise of 1.4 per cent in December 2017, delivering the worst Christmas performance for retailers in a decade.
Debenhams saw gross transactions down 3.8 per cent in the six-week period to 5 January, with like for like sales down 3.4 per cent on 2017.
Group digital sales were up six per cent over the period, amounting to two-year growth in online sales of 20 per cent, supported by improved mobile conversion and customer experience, Debenhams said.
Sergio Bucher, chief executive of Debenhams, said the results represented “the best possible outcome in very uncertain times for retailers”.
He said the company saw increased promotional activity in order to remain competitive on seasonal discounting over the period which included the Black Friday and Boxing Day sales events.
Retailers have also suffered from a drop in footfall as shoppers shift their spending online.
The sluggish trading update comes after reports that a group of lenders to Debenhams including hedge funds have turned to FTI, a restructuring advice firm, as the company draws up plan for a major transformation programme.
Sky News reported that the group of investors are weighing up future options for Debenhams after the embattled retailer announced plans to shutter as many as 50 stores, following full-year losses of almost £500 million.
Debenhams declined to comment on the report.
Responding to the Christmas trading update, Bucher said: “In order to ensure that Debenhams has a sustainable and profitable future we need a strong customer proposition, a strengthened balance sheet and a reshaped store portfolio. He added that Debenhams had a “robust plan” to protect the future of the business.
Marks and Spencer saw overall sales down 3.9 per cent in the 13 week period to December 29, with UK sales slumping 2.7 per cent to £2.78 million combined with a 15.1 per cent drop in global sales.
Overall like-for-like sales were down 2.2 per cent on the same period in 2017, with total UK food sales falling 1.2 per cent and UK clothing and home down 4.8 per cent on the previous year.
The High Street stalwart insisted the results pointed to a “steady performance” against the backdrop of a difficult trading climate.
Chief executive Steve Rowe said the company’s transformation programme, which includes plans to close more than 100 stores and upgrade the chain’s digital presence, remained “on track.”
“The combination of reducing consumer confidence, mild weather, Black Friday, and widespread discounting by our competitors made November a very challenging trading period,” Rowe said. “However, overall our 13-week performance was steady with some early encouraging signs.”
The lethargic sales figures form part of a mixed picture for retail sales over the Christmas period, which has seen retailers including Next, John Lewis and Dunelm profit from a surge in online sales while Mothercare saw sales drop by 11.4 per cent and music retailer HMV enter administration.