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Sharp's Debenhams swansong highlights tough trading

The outgoing chief executive has had a positive tenure overall but his last trading statement shows the challenges retailers face
June 22, 2016

Outgoing Debenhams (DEB) chief executive Michael Sharp's swansong probably hasn't turned out as he hoped as he revealed that the trading environment has been "weaker since the new year", as well as "uncertain" and "volatile".

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While gross transaction values for the 15 weeks to 11 June rose 0.5 per cent, constant currency like-for-like sales dropped 1.6 per cent. Online sales remained robust, up 7 per cent in the period but management is now guiding for margins to be flat for the full year instead of up to 50 basis points higher as had previously been estimated. Pre-tax profit remains within consensus range, though, thanks partly to the fact that cost increases, including the implementation of the national living wage, will be at the lower end of the 2-4 per cent range.

Mr Sharp recently took the chain through one of its best Christmas trading periods of all time and the decision to move away from being so heavily fashion-focused could be something that helps the business navigate the tougher consumer environment. Food seems to be becoming an ever-increasing part of the store estate, with approximately 40 per cent of stores set to have new eateries by Christmas. There's also health and beauty, which Mr Sharp said had showed "good growth" and two furniture concepts trialled in Manchester and Gateshead will be opened in a further six stores. It is also launching Claire's Accessories in 15 sites, perhaps to encourage a younger clientele.