The high street’s best-known names have reported mixed festive results as heavy discounting squeezed profit margins at Debenhams, Asos and Game, but Newcastle baker Greggs romped home as hungry Christmas shoppers refuelled on sausage rolls and mince pies.
Game rushed out a profit warning after the stock market closed as its chief executive Martyn Gibbs admitted that underlying profits would now be in line with last year’s £51.3m after a console price war over Christmas. Analysts had pencilled in £63.8m.
Although the number of Xbox One and PlayStation 4 consoles sold was up more than 25% over the 11 weeks to 10 January, Gibbs said that translated into a 5.4% sales decline as it was forced to sell console and games bundles at knockdown prices. “Over the Christmas trading period, starting with Black Friday, we invested margin in offering gamers competitive product propositions through the bundling of games with hardware and reduced pricing,” he said.
Debenhams chief executive Michael Sharp was also forced to defend the group’s Christmas figures after a late surge of shoppers buying perfume and makeup in its beauty halls failed to offset disappointing winter clothing sales. Shares in Debenhams closed down nearly 7% at 70p after Sharp said a challenging season in clothing meant first-half profit numbers would be at the lower end of expectations. Along with other retailers, the UK’s second largest department store chain was caught out by last autumn’s unseasonably warm weather, which left many fashion chains with piles of unsold high margin winterwear to clear.
“This is a good performance in a difficult and challenging period,” he said. “Our performance steadily improved following the well-documented challenges in the clothing market in the autumn.” Like-for-like sales were down 0.8% over the 19 weeks to 10 January, but ahead nearly 5% in the four-week period covering Christmas and new year.
Investec analyst Kate Calvert downgraded Debenhams to a “sell” and trimmed her 2015 profit forecast by £1.6m to £111.7m. “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,” she said.
After it fired off a string of profit warnings last year, investors were relieved to see Asos chalk up growth of 15% over the six weeks to 9 January. That figure included a 27% increase in UK sales as it recovered from setbacks including the fire at its Barnsley warehouse. However, the website was not immune to the tough market conditions, with its gross margin down around two percentage points from the previous year. The shares closed up 208p, a gain of more than 8%, at £26.35.
Greggs put in one of the best retail performances of Christmas 2014, telling investors profits would beat expectations after like-for-like sales growth accelerated to hit 8.2% in December. The strong performance sent the shares up 9.5% to a record close of 820.5p.
Greggs boss Roger Whiteside has been refurbishing its bakeries and menu to better compete with the likes of Pret a Manger, introducing new recipes for its popular treats such as yum yums, jam doughnuts and cheese and onion pasties.
Shore Capital analyst Clive Black said Whiteside had led an “outstanding” turnaround. “It’s refreshing that in the age of social media and Black Friday, the humble sausage roll is Britain’s winner.”
