Shareholders would have been hoping for better results, especially after NEXT's positive Christmas trading results yesterday.
Debenhams (LON: DEB) shares have slumped over 20% this morning after becoming the first company to issue a profit warning in 2018.
Investors would've been hoping for a much more upbeat trading update today after NEXT was the first listed retailer to report its Christmas figures yesterday. Its shares spiked 9% after a boost in online sales helped total sales rise 1.5%, beating previous forecasts and leading to profit guidance upgrades.
DEB has however seen Group sales for the 17 weeks to 30 December 2017 slump 1.3% including UK LFL down 2.6%.
Management said despite a strong lead-up to Christmas, the beginning of the period and post-Christmas trading were "disappointing" amid tough competition and increased markdown.
This promotional action, it said, would lead to H1 18 margins being impacted, as well as:
"H2, FY2018 profit before tax now likely to be in the range of £55m to £65m."
According to broker Whitman Howard's note today, this guidance is...
"20% below consensus at the mid-point."
The new profit guidance sent shares into a spin, trading at c. 28p versus yesterday's closing price of 35p after the stock saw marginal growth off the back of its competitor's Christmas numbers.
Whitman Howard commented:
"The question here from the sector generally is whether NEXT or Debenhams should be the appropriate comparator. With many retailers reporting next week and tomorrow a prime date for any further profit warnings, we expect some of yesterday’s bullishness to re-trace."
Despite a new management strategy and online sales growth of 22% over the past two years, Cheif Executive of Debenham's Sergio Bucher is aware the Group needs to do more to keep up:
"The market dynamics we have seen have reinforced our view that we need to move even faster to implement the cultural and organisational changes needed to ensure Debenhams is in the best possible shape for today's fast-changing retail environment."
DEB trades on a forecast PE multiple half that of the industry median, 7x and 14x respectively, has EPS growth in the red but has a forecast dividend yield of almost 9%.