Debenhams issues second profit warning in less than a year Debenhams, the department store chain, paid the price for heavy discounting in the run-up to Christmas, with its second profit warning in less than 12 months. The company said first-half pre-tax profit would be about £85m, compared with the consensus of analysts" forecasts of £110m, and joint broker Oriel Securities" estimate of £98m. The retailer also said it would suspend its share buy-back. Debenhams made underlying pre-tax profit of £114.7m in the first half of 2013. The shares fell 12.5 per cent to 72.8p. The FT reported on Tuesday that trading had been tough at Debenhams. Marks and Spencer is also thought to have experienced challenging trading. Debenhams is expected to part company with finance director Simon Herrick, according to people familiar with the situation, with a statement expected within the next few days. The company blamed the profit warning on increased promotional activity across the high street and a last-minute surge in demand failing to materialise. However, Debenhams has long been among the most "promotional" on the high street. "We are not a key culprit in the discounting at all," insisted Michael Sharp, chief executive. The whole market was very promotional in the run-up to Christmas. It was a sea of red. The higher markdowns cost Debenhams about £17m, while the depreciation charge will be £3m higher than expected, and costs £5m more. Analysts estimated that the consensus of forecasts for full-year pre-tax profit would settle at between £110m and £120m. Oriel Securities had previously cut its full-year profit forecast from £155m to £135m. Concern has been rising about trading at Debenhams since the FT revealed two weeks ago that it had demanded millions of pounds from suppliers. However, Mr Sharp said the supplier contribution, which would be in the region of £1m, had nothing to do with the profit warning. Questioned on whether Mr Sharp himself should also take responsibility for the poor performance, the chief executive said: "The pressure that I currently feel in this role is no different to the pressure I have felt all through my retail [career]." Debenhams said gross transaction value rose 0.7 per cent in the 17 weeks to December 28, while like-for-like sales rose by 0.1 per cent. Clothing was weak, although beauty, home and gifts performed better. Online sales rose by 27 per cent for the 17-week period, and accounted for 15.6 per cent of total sales, compared with 12.4 per cent for the year-earlier period. However, Debenhams said online delivery income was lower than anticipated. Higher markdowns and weaker clothing sales took their toll on the gross margin, which is expected to decline by between 0.8 and 1 percentage points in the first half. "We did not experience the anticipated final surge in sales in the last week of the period and as a result we expect the need for additional markdown to clear stock in January and February," Debenhams said. Mr Sharp said he expected "conditions to remain highly competitive as we enter 2014." While some retailers are expected to pay the price for heavy discounting, Next, which held off from promotions in stores until Boxing Day, is expected to report on Friday that it was a Christmas winner, while House of Fraser is also thought to have had a strong Christmas.