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Debenhams Boss Say High Street Was 'sea Of Red' In Run-Up To Christmas

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Telegraph 1/1/14

'The chief executive of Debenhams has said the high street was a "sea of red" in the run-up to Christmas due to heavy discounting after the department store chain issued a major profits warning. In an unscheduled trading update that confirms the tumultuous Christmas retail trading environment, Debenhams said profits will now be far lower than expected because its margins were hit by the company offering heavy discounts on clothing in December.

Debenhams said that pre-tax profits for the first half of its financial year are now likely to be around £85m, almost 25pc less than City forecasts of £110m for the six months to the end of February.

Shares in the retailer fell by 12pc to 73p, wiping £124m off the value of the company. Marks & Spencer and J Sainsburys also dropped 2pc as investors fretted about the health of the high street.

The profits warning was the second from Debenhams in less than a year and is likely to raise questions about the strategy of Michael Sharp, the chief executive.

However, Mr Sharp insisted there was not a "fundamental flaw" in Debenhams strategy. He blamed the profits warning on weak consumer confidence and heavy discounting among fashion retailers as they attempted to shift unsold winter clothing that had built-up because of the mild autumn.

Mr Sharp also warned that a "final surge" in sales in the week before Christmas had not materialised. Debenhams now plans to cut prices by as much as 70pc to sell clothing in January and February.

The profits warning from Debenhams could be the first of a handful from listed retailers given the widespread discounting in the run-up to Christmas.

Neil Saunders, retail analyst at Conlumino, said: "It is likely that many will have had a disappointing season in terms of sales, but especially in terms of profitability."

Debenham's like-for-like sales rose 0.1pc in the 17 weeks to December 28, but its margins are down by between 80 and 100 basis points compared to last year.

Mr Sharp said it had been the "most difficult trading conditions that I have experienced" and the high street had been a "sea of red".

However, he dismissed concerns that the company had suffered disappointing trading because its own constant promotions have damaged the brand.

"We didn't provoke what we saw on the high street," Mr Sharp said. "We reacted to remain competitive."

He insisted the Debenhams brand had "never been in such good health".

Nonetheless, the profits warning will increase the pressure on Mr Sharp. When asked whether his position as Debenhams chief executive was under threat, he said: "I don't know, you will have to ask other people that. I really enjoy what I do, I feel under no more pressure today than I have before."

Debenhams' struggles in December were initially flagged up after a letter from the company to its suppliers emerged earlier in the month.

In the letter, Debenhams demanded a one-off fee from suppliers worth 2.5pc of its outstanding payments and said it would apply a 2.5pc discount to orders it has agreed with suppliers.'

When retail sales data gets released,I presume we'll have a better idea whther sales were weak or it was just the High St.

Edited by Sancho Panza

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Although it still didn't tempt me to buy, I was genuinely shocked at the level of discounting I saw before Christmas throughout the high street.

Perhaps deflation is setting in on non-essentials as cash is consumed by inflating essentials such as energy, over which the public responds more slowly with respect to cutting costs.

Edited by LiveinHope

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When retail sales data gets released,I presume we'll have a better idea whther sales were weak or it was just the High St.

Seems like there are similarities for traditional retail in the US.

Reuters (today): http://www.reuters.com/article/2014/01/01/us-usa-economy-consumers-analysis-idUSBREA0006D20140101

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Only if we had no weather..eh

...anyway the last thing people with low disposable income do is spend money on fashion in expensive fashion shops....they can pick up some good warm coats or jumpers in a charity shop for very little..... ;)

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...anyway the last thing people with low disposable income do is spend money on fashion in expensive fashion shops....they can pick up some good warm coats or jumpers in a charity shop for very little..... ;)

Cash 4 clothes and the like has killed the clothes side of the charity shops around my way

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Seems like there are similarities for traditional retail in the US.

Reuters (today): http://www.reuters.c...EA0006D20140101

'The problem is two-fold. The middle class consumers to whom the likes of JC Penney Co Inc and Kohl's Corp cater have struggled with stagnant wages and a payroll tax rise, prompting them to reduce spending on apparel, said Scott Tuhy, a retail analyst at Moody's Investors Service in New York.People have also gravitated toward spending on services such as travel - airline ticket prices and hotel room rates are up - as well as movie downloads and other content for their TVs, smart phones and tablets. Prices to attend live sports events, theme parks, movies and rock concerts have also been rising.

U.S. sales of big-ticket items such as autos and home-related goods such as washing machines, as well as purchases in home-improvement stores, surged in 2013, boosting overall retail sales. Homes sales also increased pretty steadily from mid-2012, although a summer spike in mortgage rates cooled things off a bit this fall.Hiring has picked up, helping to push the jobless rate to a five-year low of 7 percent in November, but some 11 million Americans are still unemployed, and many are earning less than before the recession. When adjusted for inflation, average weekly wages have barely budged since late 2008.'

Very similar themes to the UK.Car sales are doing well,pound shops too.Clothes retailers not so well.Be interesting to see Next's results given the likely demographic crossover between the two firms customers.

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'The problem is two-fold. The middle class consumers to whom the likes of JC Penney Co Inc and Kohl's Corp cater have struggled with stagnant wages and a payroll tax rise, prompting them to reduce spending on apparel, said Scott Tuhy, a retail analyst at Moody's Investors Service in New York.People have also gravitated toward spending on services such as travel - airline ticket prices and hotel room rates are up - as well as movie downloads and other content for their TVs, smart phones and tablets. Prices to attend live sports events, theme parks, movies and rock concerts have also been rising.

U.S. sales of big-ticket items such as autos and home-related goods such as washing machines, as well as purchases in home-improvement stores, surged in 2013, boosting overall retail sales. Homes sales also increased pretty steadily from mid-2012, although a summer spike in mortgage rates cooled things off a bit this fall.Hiring has picked up, helping to push the jobless rate to a five-year low of 7 percent in November, but some 11 million Americans are still unemployed, and many are earning less than before the recession. When adjusted for inflation, average weekly wages have barely budged since late 2008.'

Very similar themes to the UK.Car sales are doing well,pound shops too.Clothes retailers not so well.Be interesting to see Next's results given the likely demographic crossover between the two firms customers.

People buying less pointless crap and spending money on having a life sounds like progress to me.

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Cash 4 clothes and the like has killed the clothes side of the charity shops around my way

....not heard of that, but I know plenty who buy second-hand on line....there is always the jumble sale....like clothes also good furniture is in abundance and can be picked up very cheaply....good furniture rarely wares out. ;)

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"We didn't provoke what we saw on the high street," Mr Sharp said. "We reacted to remain competitive."

Ah ha ha ha....

One stupid example...silk boxer shorts. I like silk boxers, very comfy. I discovered 'Thomas Nash' Debenhams silk boxers in 2009, almost exactly 4 years ago. The occasional visit we make to Debenhams allows me (for the want of anything better to do whilst waiting for the O/H) to go check up on the latest price of these very 'special' items. In 2010, they were £8 a pair. A lot of money for boxer shorts - I started buying them elsewhere when they got to £12 in 2011. 3 days ago they were £25.

Debenhams put their prices up often, and in the process always seem to miss one item of clothing of the same type at the old price. Underneath a 'sale' sign advertising 20% off, I saw one pair of boxers at £20, and all the others with fresh new price labels stuck over the old ones reading £25. After laughing to myself I walked past a sale rack with men's jumpers on it - all price tagged at £90! They are all the same old Sri-Lankan sweatshop garbage, but the prices are a bad joke. You can't get 100% wool men's work trousers there anymore. They are all made in the same factory in India (you can tell by the washing lables), and these polyester trousers are in some cases marked up at £75! You can buy M+S 100% wool for £50.

In short, Debenhams seem to be trying to well-worn path of massive price rises in the back of some perceived 'quality' brand placment - this strategy seems to be a good survival strategy against the internet and Primark. However, I think the Debenhams branding does not really support the kite-flying prices they seem to be going for.

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Ah ha ha ha....

One stupid example...silk boxer shorts. I like silk boxers, very comfy. I discovered 'Thomas Nash' Debenhams silk boxers in 2009, almost exactly 4 years ago. The occasional visit we make to Debenhams allows me (for the want of anything better to do whilst waiting for the O/H) to go check up on the latest price of these very 'special' items. In 2010, they were £8 a pair. A lot of money for boxer shorts - I started buying them elsewhere when they got to £12 in 2011. 3 days ago they were £25.

Debenhams put their prices up often, and in the process always seem to miss one item of clothing of the same type at the old price. Underneath a 'sale' sign advertising 20% off, I saw one pair of boxers at £20, and all the others with fresh new price labels stuck over the old ones reading £25. After laughing to myself I walked past a sale rack with men's jumpers on it - all price tagged at £90! They are all the same old Sri-Lankan sweatshop garbage, but the prices are a bad joke. You can't get 100% wool men's work trousers there anymore. They are all made in the same factory in India (you can tell by the washing lables), and these polyester trousers are in some cases marked up at £75! You can buy M+S 100% wool for £50.

In short, Debenhams seem to be trying to well-worn path of massive price rises in the back of some perceived 'quality' brand placment - this strategy seems to be a good survival strategy against the internet and Primark. However, I think the Debenhams branding does not really support the kite-flying prices they seem to be going for.

So many staff moping around too. Surely they must be neets used by debenhams as part of some tax credit scam. You just dont know nowadays. So many large companies on the take.

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So many staff moping around too. Surely they must be neets used by debenhams as part of some tax credit scam. You just dont know nowadays. So many large companies on the take.

Most probably tax credit 16hourers.

I was looking for stuff on facebook - old pictures of my home town in a memories group - and I stumbled across a group/whatever for advertising/searching for jobs.

The majority of the posts were in, roughly, three types: teens asking for washing up/paper round jobs, a few franchise/party sales idiots - Avon mainly and single mums asking for 16h.

Now my home town is a traditional employment blackspot.

The tax credit system has destroyed the labour base - there's hardly anyone after 40h full time jobs. Everyone wants low skilled, part time jobs.

Fcking Brown and his stupid client state.

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(Reuters) - Debenhams (DEB.L) said on Thursday its Finance Director Simon Herrick had quit, two days after the British retailer issued a sharp profit warning due to poor Christmas trading.

Herrick, who had held the role for two years, was already under fire after he asked suppliers for a discount and a one-off contribution in the days running up to the key festive period, according to local media reports.

Whoever takes the job will be tasked with rebuilding confidence among investors after the group issued its second profit warning in less than a year. Its shares are down almost 40 percent in the last 12 months.

in full: http://www.reuters.com/article/2014/01/02/us-debenhams-idUSBREA0105B20140102

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Hmm.

DEBs was the first of the private equity 'refreshed' companies from 2000-2006-sh to be re-listed.

What could possibly go wrong with replacing all the fixed assets with debt.

Surely its a business plan that cannot fail???

Let me think of others that have had the benefit of PE: Premier Food.

Any more?

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Company specific it seems :

(from Venger's article)

Basically, trying to squeeze drops out of a retailer as Private Equity is wont to do typically signs their death warrant.

They were doing well when they were design led. The story of British business writ large where the accountants and bad management have helped destroy industry.

...certain companies are more ethical than others....reaserch to spend. ;)

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Plenty of quality clothing in the charity shops. Not paying top dollar for former great British brands like Ben Sherman now made in sweat shops.

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Telegraph 1/1/14

In the letter, Debenhams demanded a one-off fee from suppliers worth 2.5pc of its outstanding payments and said it would apply a 2.5pc discount to orders it has agreed with suppliers.'

When retail sales data gets released,I presume we'll have a better idea whther sales were weak or it was just the High St.

How long before the staff get asked for a 2.5% + pay cut ?

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I've been a Debenhams regular in the past, they had a good range of men's clothes - decent quality and good price. I still regularly go in, but always come out empty handed these days. The range appears to have shrunk massively, the prices have gone up and the quality come down.

Anyways - I went in at Christmas looking for something for my wife and it was absolutely dead when everywhere else was heaving. The last time I experienced something similar was just before C&A went down. It was like a little spot of calm in a maelstrom.

I ended up buying what I wanted from Primark (which was insanely busy) - same stuff (a onesie), made in the same factory, third of the price. I know that many decry the likes of Primark for being cheap tat, but when your clientelle are mainly buying things expected to be out of fashion in 3-6 months, why worry about delivering high quality, timeless classics? Ironically that is what you'd expect from Debenhams. People, it seems, aren't as stupid as you might think.

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Sorry to sound like a thrifty boaster but who on earth needs to spend lots of money on clothes?! I only get socks and pants new and don't buy them that often.

The only thing I've bought new in the last year was a tweed jacket which I had a local tailor make up (I live abroad) from Harris Tweed. It's lovely and if I should be spared will last me the next 20 years or so for most semi-formal occasions.

Suit - made ten years ago by a London bespoke tailor. Still fine for the occasions when I need to wear one.

Ties, shirts etc all from charity shops for a few pounds. Collars and cuffs get turned and a shirt lasts me about 5 years.

Jeans - last pair lasted ten years and cost £12 from Officer's Club. New pair bought last year (£18) probably wont' last that long but at least 5 years I'd say.

Jumpers - about £3 from charity shops

Shoes, a pair of Cheaney's which I've had for 13 years, still going strong. For smart wear, a pair of RAF parade shoes, almost unwearoutable.

Coat, a charity shop wool job (£10) for smart wear and an army surplus issue parka (£23) for casual. No wearing out in sight for a few years yet.

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Used to work for Debenhams about 20 years ago as a Trainee Manager - left for a head office career

I did go into a Debenhams just before Christmas as my Dad wanted Wrangler jeans which seems like a bit of an old brand not sold in too many places. £50, no discount.

During that shopping visit, to Basingstoke, I couldn't really tell if stuff was discounted or not.

Because what seems to have happened in the retail model is to bring lines in at ludicrous prices which nobody would ever pay, and then "discount" them. The "DFS" approach.

I thought this ruse got banned back in the 1980s when retailers had a stipulation that you had to have the product on sale at the higher price in at least one store for 28 days in order to show a "discount" however I think the internet - for this purpose - counts as a store, so the retailer just needs to put the product on the website 28 days ahead and can then sell at a "discount" as soon as it is put on display in stores.

Debenhams used to do this with Ben Sherman stuff - comes in at 29.99 but the actual intended sell price was 14.99 "half price" and that's when the stock all sells. But now I'm not sure the retailer need even do the 29.99 bit and can just go straight to the promotional price

So when I go into stores, I really have no idea whether something is a "bargain" or not. It, er, costs what it costs now. What it cost last week isn't relevant... is it?

In the meantime the likes of Primark simply pursue the lowest price which people seem to respond to.

The effect of which being - if you want a bargain you'll always find one in Primark, and the stigma attached to going to such a store seems to have fallen away thanks to the economy going tits up - that there aren't really any "bargains" in the big stores even when there's a sale on - "the boy who cried wolf" as it were.

Edit: and on that very subject, Asda takes on pound stores with 50p offers

Asda wants to make discount stores 'look expensive' by cutting prices of key products
Edited by DTMark

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Ahh yes - I remember the article about showing 'fat' women and non airbrushed 'women'. http://www.telegraph...hed-models.html

and chunky dummies: http://www.cnbc.com/id/101174696

We cynics knew the 'right on' approach wouldn't work.

Also interesting to note they have just seen fit to appoint their first woman to their current Board 12th Dec as though that might help understand their clientelle. A bit late. Make sure it is the right woman too boys.

(do you think she's got 'issues')

101174719-dummies.530x298.jpg?v=1383743321

I see what you did there...very sharp.

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