Debenhams, the department store operator, said on Tuesday that its summer sales figures had been hit by a big push to convert shop floor space from concessions to its own products.
However, it said in a trading statement that annual profits for the financial year just ended would still increase in line with management expectations.
Debenhams is giving more prominence to its own ranges, such as its Designers at Debenhams clothing collections, because they are more profitable than concessions, although sales per square foot are lower.
Over the past three months, about 500,000 square feet of trading space has been converted to its own products. However, this switch disrupted summer trading, the company said.
For the second half of its financial year, which ended on August 29, like-for-like sales were 3.8 per cent lower than the prior year period, a trend that was markedly worse than the 0.8 per cent decline experienced in the spring.
Rob Templeman, Debenhams chief executive, said the summer sales dip would have been closer to 2 per cent excluding the changes to its trading space, which conclude at the end of next week.
“We had market share gains across all our product categories,” he said, adding that the group was now trying to increase its presence in children’s clothing.
The statutory sales figure announced at its annual results next month would be 0.2 per cent higher than the previous year, the group said.
Mr Templeman declined to give precise guidance for full-year profitability but said analysts had been predicting that underlying pre-tax profit would increase from £110m to about £122m-£124m.
He said profit would rise because sales had become more skewed to Debenhams’ own products, such as the fast-growing Designers at Debenhams range. Tight control of stock and costs were also cited as reasons.
Debenhams – which raised £323m from shareholders in June – gave little detail about current trading, although Mr Templeman said he was “encouraged to a degree” by prospects for the current financial year, citing signs of recovery in the housing market and easier year-on-year comparisons.
Its shares, which had surged in value during the spring, were broadly unchanged at 85.1p in early trading on Tuesday.
● Shares in Dunelm, surged on Tuesday after the out-of-town homewares retailer said sales jumped dramatically in recent weeks as customers with smaller budgets returned to its stores, writes Megan Murphy.
Like-for-like sales rose 16 per cent in the 10 weeks to September 12, compared with a 0.5 per cent fall for the year ended on June 28.
“The strong like-for-like sales performance in the latter weeks of the financial year has continued through the rest of the summer, and we are very pleased with the start to our new financial year,” said Will Adderley, Dunelm’s chief executive.
Releasing its full-year results, the retailer met analysts’ estimates in posting pre-tax profit of £52.5m, up from £49.1m for the year ago period. Total sales were up 6 per cent to £417m.
While the recent sales gains will cheer analysts and investors, Mr Adderley warned that it would be “very challenging” to maintain the group’s recent trading performance in the current economic climate. “Nonetheless, we are confident of continuing to grow our market share and we remain excited about our growth prospects in the medium term,” he said.
Dunelm, which operates 97 Dunelm Mill branded stores, mostly in the Midlands and the north-west, said its average shopping basket remained below £30.