Festive trading on the High Street split into two camps yesterday with growing fears that Marks & Spencer will announce weak trading figures next week following a poor performance at Debenhams, which parted company with its finance boss yesterday.
Debenhams warned of a sharp fall in profits after big discounts failed to spur a rise in last-minute Christmas shopping, sending a shiver through weaker retailers.
The performance was in sharp contrast with buoyant figures from rivals John Lewis and House of Fraser.
John Lewis said like-for-like sales climbed 6.9 per cent over the five weeks to December 28, while House of Fraser hailed its best ever Christmas with comparable store sales up 7.3 per cent.
M&S, Britain’s biggest clothing retailer, made the rare move of slashing 30 per cent off all clothing in the run-up to Christmas, prompting fears it that it suffered weak trading in the critical trading period.
M&S is due to give a trading update next Thursday and poor figures would pile more pressure on chief executive Marc Bolland, the former Morrisons boss, whose recovery plan around higher quality and more stylish fashions has so far failed to kick-start sales.
Pre-Christmas reductions reflected the retail battle for cost-conscious customers as more people shop online.
High Street trading was hit by storms which battered Britain and kept many shoppers at home on some of the biggest trading days of the year.
Debenhams, Britain’s second-largest department store group, said it will miss analysts’ first-half profit forecasts and would have to slash prices to clear stock.
The company has always used promotions to drive sales, offering 50 per cent reductions in the run- up to Christmas on some items, but the company said it had to offer particularly deep discounts this time round to keep up with competitors.
Debenhams, which has plans to be an anchor tenant in the Westfield centre in Bradford, now expects profit before tax for the first half of its financial year to March to be around £85m.
Numis analyst Andrew Wade said: “It looks like they’ve obviously had a very challenging Christmas period.
“We don’t expect others to be warning in such a dramatic fashion.”
He added that the highly promotional run-up to Christmas and the “extremely difficult environment” were only part of the story.
“While there is undoubtedly some truth in this, we believe that Debenhams’ major issues are more company-specific,” he said.
Debenhams has struggled more than most due to its weaker online offering, reliance on discount offers – whose impact may damage its image over time – and own-brand ranges that lack the cachet of labels found at rivals.
Debenhams stores have also failed to keep pace with the more modern outlets of John Lewis, Britain’s biggest department store group, which has outperformed competitors in recent years due to its strong web presence, attractive stores and more affluent customer base focused in the South-East.
Mr Wade said there was “some scope for disappointment” among other clothing retailers, especially those which resorted to early discounting.
“We are confident that the strong updates from House of Fraser and John Lewis will put them both firmly in the ‘winners’ column this year, but see enough to suggest that Debenhams’ problems are more company-specific than market-led,” he said.
Next, which refused to discount before Christmas, reports figures today.
Debenhams finance boss quits: Business, Page 18.