The balance between attractive pricing and stable profits is always difficult for retailers, especially at this important time of year. It appears that Debenhams has not been able to judge consumers’ mood as skilfully as some of its competitors, following its profit warning this week.
The early indications are that once again companies that have managed to successfully offer an online platform for their customers will have benefited the most. It has become increasingly common to see sales signs appearing in shop windows at the beginning of December, rather than as historically in January, and this has made the use of discounts a less powerful tool in maintaining market share.
Debenhams is likely to see first-half profits in March come in at around £85 million, rather than the previous market consensus of £112 million, and consequently the shares have suffered. On Tuesday, when the announcement was made, the share dropped by more than 10%. This morning has seen a short-lived blip higher following the announcement that financial director Simon Herrick has stepped down.
Falling profits, lower market share and unimpressive sales figures are all adding up to a gloomy start to 2014 for Debenhams. Better online facilities coupled with improved business strategy will be needed to turn market sentiment around, and until these materialise it looks like a sell.