Debenhams says trading conditions to get worse

Debenhams the number two department store group, said first half underlying sales fell as consumer demand waned in the face of tough economic headwinds and cautioned conditions were likely to get worse.

Debenhams, which trades from 166 stores in Britain, Ireland and Denmark, and about 60 franchised outlets in 23 countries, today forecast first half profit ahead of last year and in line with market consensus.

But it said trading across the UK high street was likely to be difficult in the second half of the year.

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“Looking forward, it is clear that disposable income is under pressure from inflation, public sector spending cuts and higher taxation,” said chief executive Rob Templeman.

The firm’s sales at stores open more than a year fell 1.5 per cent excluding VAT sales tax in the 26 weeks to February 26.

Debenhams, ranked second after employee-owned department store group John Lewis, said its gross transaction value over the period increased 3.2 per cent year-on-year.

It said its gross margin increased during the first half.

Debenhams shares, which returned to the stock market at 195 pence in 2006 after two and a half years in private equity hands, have lost 18 per cent of their value over the last three months.

The stock closed yesterday at about 58.7 pence, valuing the business at about £755m.