Newspaper article The Journal (Newcastle, England)

Price Cuts Will Be Unkind to Profits in Sales Figures

Newspaper article The Journal (Newcastle, England)

Price Cuts Will Be Unkind to Profits in Sales Figures

Article excerpt

Byline: Holly Williams

THE extent of retail's toughest Christmas for years will be revealed this week with sales figures from Marks & Spencer, Debenhams and Next.

Marks & Spencer reports on Wednesday after an aggressive pre-and post-Christmas sales campaign, with 20% discount days before Christmas and reductions of up to 50% afterwards.

Hopes of a late surge in sales were boosted by John Lewis figures showing a year-on-year sales rise of 1.2% in the week to December 27. Waitrose sales rose more than 40%.

But with margins under pressure from discounting, analysts expect bad news from M&S and predict a profit warning may accompany the sales figures.

Last year's Christmas trading update shocked analysts when M&S revealed a 2.2% sales drop in the 13 weeks to December 29, 2007 - its first negative result for nine quarters.

Food sales fell 1.5% last year, while general merchandise was down by 3.2%, but analysts expect a worse 2008 festive period.

Next has already set the scene for a difficult festive season after warning in November of worsening sales drops in the autumn and winter and into 2009.

The group, which updates tomorrow, gave assurances it was on track to meet profit targets despite a 4.4% fall in sales in the 14 weeks to November 1, but it has already said it expects retail same-store sales to drop 4-7% in autumn to winter.

Debenhams' debt as well as sales will be in focus when it updates tomorrow.

It is reportedly planning a fundraising move to reduce its pounds 1bn debt.

The company said last October it was concentrating on debt reduction as it halved its dividend payout. It also reported a 16% drop in annual profits to pounds 110.1m and said sales had fallen 4.2% since the end of August. However, it increased its market share in clothing and its programme of store openings and refits progressed. …

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