Debenhams adds to retail sector troubles

The economic slowdown has meant consumers are cutting back and High Street stores, in particular, have suffered.

Many well-known chains have gone bust recently with many reporting falls in profits and sales and are prepared for a challenging time during the build up to Christmas.

Debenhams has today announced a 16% fall in profits and has slashed its final dividend and will now pay 0.5 pence a share. This gives a total dividend of 3p, down from 6.3p a year ago.

In the six weeks since the end of August, like-for-like sales fell 4.2%, while pre-tax profit before exceptional items fell to £110.1 million for the year to the end of August, compared with £131.4 million in 2007.

The debt-laden chain, which runs 145 stores across the UK and Ireland, is planning a cost-cutting programme to reduce debt of £994 million, which it admitted was causing uncertainty over its future. The measures include lowering costs and plans to reduce investment. The group acquired its debt when it was re-floated on the stock market in 2006.

According to Rob Templeman, chief executive, the group remains focused on managing the business tightly in view of challenging trading conditions which is primarily due to nervous consumers concerned about their financial security.

Last week, department store John Lewis announced a fall in sales, while yesterday retailing giant, Marks and Spencer, announced job cuts at its head office.

According to Nick Bubb of Pali International, anxiety is growing for the retail sector and if things don’t improve next week during half-term, retailers will be staring disaster in the face.

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