Debenhams shares tumble as it warns on profits after a tough Christmas 

Debenhams has been savaged by investors after the department store chain issued a shock profit warning following dismal Christmas sales and a failure to entice shoppers with cut-price goods.
The retailer blamed a “volatile and highly competitive” environment as it cut its full-year profit guidance to between ?55m and ?65m, sharply down from the ?80m it previously forecast.
The company was forced to bring forward its bad news by a week in order to correct excessive optimism about retail fortunes following surprisingly upbeat sales from Next a day earlier.  
As a result, shares in Debenhams plunged by as much as 20pc, wiping almost ?70m off the value of the business and taking the retailer close to its record lows in 2008 when it was forced to turn to shareholders to address its ballooning debt pile.  
Debenhams share price
Debenhams reported that UK like-for-like sales had fallen by 2.6pc in the 17 weeks to December 30. The lacklustre sales prompted Debenhams to aggressively slash prices in the run-up to Christmas, which pushed up like-for-like sales by 1.2pc in the last six weeks of the period.
However, as a result of the heavy promotions and a disappointing post-Christmas sale period, Debenhams’ profit margins slumped.
Chief executive Sergio Bucher blamed a weak performance in its gifting ranges, which were not distinctive enough from its rivals and meant that it missed out on the usual rush of present-buying shoppers.
The disappointing sales are surprising given that the category has been a strong driver of revenue for Debenhams for the past three years.  
"The market has been challenging and particularly promotional in some of our key seasonal categories and we have responded in order to remain competitive for our customers, which has impacted our profit performance,” Mr Bucher said. He promised a more “innovative” approach to gifts next year.
Debenhams shares tumble as it warns on profits after a tough Christmas 

Debenhams has tried to ramp up its beauty halls with exclusive ranges by make-up artist Kat Von D
“Eight months after launching his ‘Debenhams Redesigned’ strategy, Sergio Bucher must be wondering what he has let himself in for by taking the job, as today’s huge profit warning means it looks more like a case of Debenhams Undone,” commented Russ Mould at AJ Bell.
The Debenhams boss, who joined from Amazon Fashion last year, said that he was still “confident” in his strategy and “optimistic about the future of department stores”. Mr Bucher is working to ramp up the group’s online business and focus on beauty and restaurant concessions to lure more shoppers into the store.
“What I have learnt from the last three months is that we need to get there quicker because ‘business as usual’ will not be what makes us successful in the future,” said Mr Bucher. He revealed plans to cut a further ?10m from costs - largely due to stripping out layers of management and property negotiations - to help shore up profits.
Debenhams has earmarked 10 shops for closure and already shut two loss-making sites.
The business is hamstrung in its ability to shut more stores due to its long lease commitments.
Chief financial officer Matt Smith did little to soothe fears about the future of Debenhams’ dividend saying that it was something “we’ll be clearly reviewing and discussing with our board at the half year” in April.
Mr Bucher attempted to distinguish Debenhams from Next, which generates almost nine times as much profit, by arguing that “over 50pc of our business model is outside of clothing, therefore the dynamics of our business are very different”.
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