Snow hit Debenhams sales hard in January (Reuters)
Debenhams PLC, the British department store, blamed snowfall in January for a sharp drop in like-for-like sales in the month and warned that its gross margin for the year would likely now be flat.
Early trading in London saw Debenhams shares plunge by over 11 percent to change hands at 83.5 pence each.
Its UK business was “severely disrupted” by the month’s bad weather from 14 January through to 27 January, with like-for-like sales during that period falling by 10 percent, and additional February promotions for Valentine’s Day could not recover all the losses made.
Bosses now expect profit before tax for the first half of the financial year to be around £120m because of the “short but heavy period of disruption”.
"Whilst the impact of the snow on the outcome for the first half is disappointing, it is now behind us and sales volumes have recovered," said Michael Sharp, chief executive of Debenhams, in the retail firm’s trading statement for the 26 weeks to March 2.
Despite the January hit, Debenhams’ first half saw group like-for-like sales grow 3 percent on the year before.
"Although the snow will have proved disruptive, the wider problem was that it gave already cautious consumers another excuse not to spend," said Matt Piner, Research Director at retail analyst Conlumino.
"The term ‘January sales’ was pretty misleading this year, given that much retailer promotional activity began as early as Christmas Eve. Indeed by the time the New Year arrived many consumers were ‘shopped out’ and their thoughts were already turning back to budgeting to protect themselves against an uncertain economy.
"The arrival of the snow from January 14 onwards then further hastened this process meaning that, by the second half on the month, there was very little consumer activity by historic standards.
"This particularly impacted retailers like Debenhams, which rely on the buzz and excitement surrounding sales periods to generate much of their volumes."
Debenhams will report its full first-half results on April 18.
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