LONDON (Alliance News) - Retailer Debenhams PLC said on Thursday it has slashed its interim dividend following a considerable drop in profit due to a disappointing Christmas season, adverse weather, and costs from its Debenhams Redesigned strategy.
In addition, the retailer said Chief Financial Officer Matt Smith will step down from his role after three years since to take up the role of finance director at Selfridges.
He joined from baby products firm Mothercare PLC, where he was chief financial officer for two years from 2013 to 2015.
Smith will remain in his position until a replacement is found to allow for an orderly handover.
Pretax profit for the six months to March 6 fell by 85% to GBP13.5 million from GBP87.8 million for the same period the year before, primarily due to an exceptional cost of GBP28.7 million from its strategic review and restructuring, which involves simplifying and refocusing its business for a more efficient use of its resources.
On an underlying basis, pretax profit dropped by 52% to GBP42.2 million from GBP87.8 million, on revenue of GBP1.32 billion, down 2.4% from GBP1.35 billion the prior year.
With a disappointing Christmas season leading to an increase in competitor discounting, the group's gross margin rate fell by 160 basis points with the clearing of Gift ranges and management of seasonal stock.
In addition, Debenhams' final trading week was disrupted by extreme weather conditions, dubbed as the 'Beast of the East', which led to 100 stores being closed.
As a result, the group has cut its dividend by 51% to 0.50 pence per share from 1.025p the year before.
Furthermore, Debenhams now expects pretax profit for the full year to be at the lower end of market expectations, which currently range from GBP50.0 million to GBP61.0 million.
"The UK retail environment is undergoing profound change, and with the help of some important new senior hires, we are moving faster and working harder than ever to ensure Debenhams is well-placed to outperform in this new retail world. We expect no help from the external environment, so we are focused on delivering our Debenhams Redesigned strategy, aiming to mitigate difficult trading conditions through self-help initiatives," said Chief Executive Officer Sergio Bucher.
"It has not been an easy first half and the extreme weather in the final week of the half had a material impact on our results. But I am hugely encouraged by the progress we are making to transform Debenhams for our customers," Bucher added.
Shares in Debenhams were down 2.0% at 22.86 pence on Thursday, having reached 20.74p earlier in the session.
Debenhams' results come as data from the UK Office for National Statistics showed that retail sales including auto fuel, dropped 1.2% month-on-month in March, in contrast to a 0.8% rise in February. Sales were forecast to fall 0.6%.
Similarly, excluding auto fuel, retail sales volume dropped 0.5% reversing a 0.4% rise in February. Economists had expected a 0.4% decrease.
On a yearly basis, overall retail sales volume growth eased to 1.1% in March from 1.5% a month ago. Economists had forecast sales to grow at a faster pace of 1.9%.
Sales, excluding auto fuel, also grew by 1.1% after rising 1.2% in the previous month. The expected rate of growth was 1.4%.