Record sales in the week before Christmas helped Debenhams avoid another disastrous festive season, although the retailer’s shares have tumbled as it warned of falling margins.
The company issued a profit warning in December 2013 after customers fell out of love with its endless discount events.
It later parted ways with finance director, Simon Herrick, who was accused of imposing a “Santa tax” on suppliers.
Since then, the department store has cut back on promotions and improved its online business.
This helped it post a 4.9% rise in like-for-like sales in the four weeks ending January 10 and 2.4% for the seven weeks ending on the same day.
Online sales were up 125% on Black Friday, the US import that led to heavily discounted sales across the retail sector.
Despite this, warm winter weather hit sales going back 19 weeks, which fell 0.8%.
Debenhams also said that gross margins were likely to be at the lower end of City forecasts this year because sales of lower-margin goods, like beauty products, rose before and during the Christmas period.
The warning spooked investors and hit the company’s share price by more than 7% today.
Kate Calvert, retail analyst at Investec, said: “While it is encouraging that management stuck to its new trading stance with 10 fewer days on promotion, we continue to believe that Debenhams is strategically challenged and needs to reinvest further gross-margin opportunity back into the offer.”
In contrast, Asos’s shares rose by more than 6% after the online fashion chain put last year’s warehouse fire and three profit warnings behind it by increasing retail sales by 15%.
Its UK business was a stand-out performer with sales rising 27%, while its international operation was up by 5%.
Ted Baker was another of the Christmas winners after it last week unveiled a 22.8% jump in retail sales for the eight weeks to January 3, with online jumping nearly 66%.
Ray Kelvin, who grew the brand from a shop in Glasgow to a global player, has taken advantage of this by cashing in about £4.6 million of free share options.
