Debenhams, snow problem

Debenhams updated the market this morning with a profit warning, which they put down to snow.

The strong sales momentum reported on 8 January 2013, with Group like-for-like sales up 2.9% for the first 18 weeks of the half, initially continued at a similar level with Debenhams making further market share gains in key categories*. 

In the latter part of January, however, the UK business was severely disrupted by the snow which fell across the country.  Whilst Group like-for-like sales grew by c.3% for the 26 weeks, during the snow-affected period of 14-27 January UK like-for-like sales were down by c.10%.

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11506189

Blaming the weather seems to be a regular tactic from High Street retailers, especially in winter, when things go wrong. Unfortunately such excuses, especially when snow is mentioned as the specific reason, opens them up to ridicule. After all, some retailers did ok, the snow didn't seem to affect them. Of course, this might be simplistic as some areas of the country had bad weather while others had it more mild. One major retailer near where I live I find I cannot get to if there are several days of rain beforehand because flooding usually makes the only route other than a long time consuming journey around it, impassable. When that happens I shop elsewhere and they lose my custom, I'm sure for others its the same.

The trouble is that blaming snow in winter comes across as a lame excuse, because, well, we are likely to have snow in cold weather. Fair enough, say that bad weather probably encouraged people to decide to stay at home in the warmth, after all, judging from Centrica's recent profits announcement that's exactly what a lot of people must have done, but they should leave the snow out of it. Bricks and mortar retailers have no choice but to live with the weather good or bad.


Debenhams did end the statement on a positive.

Michael Sharp, Chief Executive of Debenhams, said:

"Whilst the impact of the snow on the outcome for the first half is disappointing, it is now behind us and sales volumes have recovered.  We are confident in our spring/summer ranges and that we can grow sales in the second half.   

Maybe so, but for now sentiment and the market trend is against them and their weekly chart looks very ugly. Bottom feeders should be aware for now that until that trend levels off there could be more downside to come. However, that may well have played itself out by the time the company announces its second half results (or even before if the market anticipates recovery), if so, another uptrend may well be on the way. Then we will get into the winter period again and traders should watch out for any signs of snow. It would appear that any heavy snow falls is a signal to get ready to go short on bricks and mortar High Street retailers.

Debenhams - Weekly