Debenhams has been affected by the squeeze on incomes in the UK, as prices rise higher than wages (Reuters)
Debenhams shares tumbled by more than 6% on the London Stock Exchange after the British department store reported a pre-tax profit drop in its full-year results.
For the 52 weeks ending 31 August, Debenhams said profit before tax fell 2.7% to £154m (£248.9m, $180.3m). Gross margin was flat.
Retailers have been hit by the ongoing decline in household incomes as the effects of rising inflation, weak wage growth, and cuts to the government's welfare budget trims consumers' disposable income.
"I am pleased with our performance in 2013 given the very difficult conditions," said Michael Sharp, chief executive of Debenhams.
"We gained market share in key categories, demonstrating the competitiveness of our product offer. We continue to deliver growth and additional customer benefits through our strong multi-channel capabilities.
"At the same time, we are working hard to ensure our UK stores adapt to the challenge of their changing role in a multi-channel world."
Sharp was pessimistic about the UK economy's prospects, even as GDP growth picks up more than expected in 2013 and there is talk of the country finally ambarking on a recovery.
"Whilst consumer confidence may be showing signs of improvement, we expect that household incomes will remain under pressure from inflation growing ahead of wages," he said.
"With this in mind, we remain cautious about the strength and pace of any consumer recovery in 2014 and expect the marketplace to remain highly competitive."
In January, Debenhams blamed a period of heavy snowfall on a sharp decline in like-for-like sales during the month when compared to a year before. It dented the progress made by a record-breaking Christmas season for the retailer.
David Alexander, consultant at retail analyst Conlumino, was broadly positive about Debenhams full-year results.
"Investments in stores, improvements in multichannel and a focus on international growth and building on the success of its well-established clothing sub-brands should help Debenhams lay the foundations for long term success," said Alexander.
"With these foundations in place, Debenhams should emerge less susceptible to the vagaries of the seasons and its fortunes will be less reliant on discounts and promotions."
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