Debenhams reassesses profit expectations
In yet another worrying development for the UK High Street, department store Debenhams has lowered its expectations for FY2018 profits.
In a trading update issued today (19 June), Debenhams said: “Against a background of increased competitor discounting and weakness in key markets, trading in May and early June has been below plan despite weak comparatives. We have reassessed our expectations for the balance of the year and now expect pre-tax profit for FY2018 to be in the range of £35m-£40m, with EBITDA in the range £160-£165m. This compares with current market PBT consensus of £50.3m.”
Debenhams added: “We anticipate year end net debt will be in line with our previous guidance, at c.£320m, retaining significant headroom on our £520m facilities. In order to give us maximum flexibility amidst difficult trading conditions we are taking the opportunity to strengthen our balance sheet further. Whilst still pushing ahead with key strategic initiatives, we are planning for a material reduction in FY2019 capex. As a result we expect net debt to be lower in FY2019 than in FY2018. We also intend to conduct a strategic review of non-core assets, aiming to focus investment behind our strategy.”
Debenham’s CEO Sergio Bucher commented: “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.
“We see clear evidence of progress as our digital growth outperforms the market and customers respond positively to our product improvements and format trials. 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.”
As previously reported, the UK’s bricks and mortar retail sector has been through a torrid time of late. House of Fraser, Marks & Spencer, New Look and Mothercare have all announced store closures this year, while Toys’R’Us and Maplin have gone into administration.
