Debenhams (LON: DEB) has issued a profit warning for the third time this year, sending shares down 16 percent in early trading.
The department store “increased competitor discounting and weakness in key markets” for the lower than expected profits in 2018.
Sergio Bucher, the chief executive, said that expected profits will be somewhere between £35 million and £40 million when previous estimates stood at £50.3 million.
Debenhams first issued a profit warning in January following a disappointing Christmas.
Bucher said that the group was carrying out cost-saving plans including negotiating the rent of 25 stores and plans to close up to 10 loss-making stores as well as to cut the size of 30 outlets.
Shares in the group plunged in early trading before recovering slightly to 16.9p. Shares have lost over half their value since the start of the year.
“It is well documented that these are exceptionally difficult times in UK retail, and our trading performance in this quarter reflects that. We don’t see these conditions changing in the near future and, because it is our priority to maintain a robust balance sheet, we are making very careful choices about how we deploy capital,” said Bucher.
High street retailers in the UK are suffering during “exceptionally difficult times”, said Bucher.
The Debenhams rival House of Fraser announced this month that it was shutting over half of its UK branches, including the store in London’s Oxford Street and putting 11,000 jobs at risk.
“In 2013 Debenhams was posting pretax profits of more than £150m a year, but half a decade of falling sales and heavy discounting has trashed margins and left the group struggling to make ends meet,” said Nicholas Hyett, an equity analyst at Hargreaves Lansdown.
“Bucher’s recovery plan seems like the right idea. A background at Amazon means online sales are taking centre stage, and growth here has been strong. Playing to the group’s strengths in cosmetics and concessions also makes sense. Unfortunately it all feels like Debenhams is playing catch-up with an industry that’s left it behind.”