Slowdown at Debenhams fuels consumer spending fears

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The Independent Online

Debenhams, the department store retailer, yesterday revealed a sharp slowdown in sales in the past two weeks, fuelling concerns that consumer spending is beginning to weaken in the aftermath of the terrorist attacks of 11 September.

In the seven weeks to 20 October like-for-likes sales were 3.4 per cent ahead of the same period last year, though margins were 1 percentage point ahead. The sales figure was down from the 8 per cent underlying growth Debenhams saw in the year to 1 September.

The slide occurred in Debenhams' two-week sales at the start of October. The company said it could have been due to the recent spell of warm weather, which has affected sales of winter coats and knitwear, or its decision to cut prices by a smaller degree in its sale this year. Another possibility is declining footfall in British high streets, with some studies suggesting shopper numbers are down by 5-10 per cent.

Matthew Roberts, finance director, said: "The recent volatility in sales makes it hard to know whether the downturn reflects a fall in consumer confidence. It could be a blip." He added that a quarter of Debenhams' sales are made in the run-up to Christmas.

David Stoddart, retail analyst at Teather & Greenwood, said it was too early to say if weakening sales related to a decline in consumer confidence, which has remained surprisingly resilient.

Debenhams shares closed 1p lower at 388p, having fallen sharply last week.

The slowdown overshadowed a strong set of full year figures from Debenhams, with pre-tax profits up 12.7 per cent to £146m. Sales of own brand merchandise have been particularly strong and now account for half Debenhams' sales.

Debenhams, which has 97 branches, announced plans for two new stores in Bradford and Londonderry in 2004, with the creation of 500 jobs.

Belinda Earl, Debenhams' chief executive, who took maternity leave this summer, is back at work part time and will return on a full-time basis in the next few months.