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John Lewis and House of Fraser report record Christmas trading, but Debenhams issues profit warning

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John Lewis and House of Fraser both reported busy Christmas selling seasons both online and off. But at fellow department store Debenhams the picture was less rosy as just after Christmas it issued a warning that profits would be around 25% after the expected last-minute sales surge failed to materialise.

At John Lewis , total sales rose by 7.2% in the five weeks to December 28, compared to the same time last year. Online sales rose by 22.6% over the period, with store sales up by 1.2%. Online sales accounted for 31.8% of total sales. But crosschannel sales rose still more sharply, with click and collect orders up by 61.8%.

The company reported several records broken over the Christmas period, with Black Friday, November 29, the biggest ever day for online orders, the final pre-Christmas week, to December 21, seeing sales top £160m for the first time, and December 27, the first day of its annual Clearance sale event, the biggest ever day for the business as a whole, with £35.6m spent across channels. Traffic from mobile devices made up three quarters of total traffic on Christmas Day.

“This Christmas has seen trade take a different shape to previous years, with an early peak driven by Black Friday and a huge surge in the final 10 days,” said Andy Street, managing director of John Lewis.

“Many of the big online shopping days and weeks occurred earlier in the period but shops were packed in the last-minute rush on manic Monday when we saw our city centre shops record peak days. The shift to mobile devices for online shopping has been confirmed but the in-store sale is well and truly thriving, as shown by the record first day for Clearance in our shops on 27 December. With new highs in branches as well as for, this has been a genuine omnichannel Christmas.”

Meanwhile, House of Fraser reported its best-ever Christmas trading period. Like-for-like sales rose by 7.3% in the three weeks to December 28. Again, the biggest boost came from online, with sales up by 57.7% over the period, while store sales were up by 3% over the period.

House of Fraser chief executive John King said: “The peak Christmas trading came late, however it was the best we have ever recorded.”

He added: “This performance demonstrates the success of our strategy to continuously improve our online proposition, develop both our House Brands and premium branded proposition and invest in our stores to give our customers the best possible shopping experience.”

The company’s own brand sales rose by 22.8%. King said: “We remain clearly differentiated with our leading branded fashion offer representing approximately two thirds of our sales. We are particularly pleased that this key part of our business was up nearly 10% over the peak period and clearly outperformed the market.”

However, while the upbeat story of rising sales was not repeated across the board. Earlier in the week fellow department store Debenhams issued a profit warning despite fast online growth and today it announced the departure of its finance director. In the 17 weeks to December, Debenhams’ like-for-like sales rose by 0.1%, with online sales up by 27% and accounting for 15.6% of total sales. But, it said, high sales were hit by the cost of delivery, with income in this area “lower than anticipated”. Gross profit margins, it said, fell over the period because of higher discounts and the mix of products on offer.

“We did not experience the anticipated final surge in sales in the last week of the period,” said the department store in its interim management statement this week, “and as a result we expect the need for additional markdown to clear stock in January and February.” Pre-tax profits, it said, would be at around £85m, about a quarter down on its first-half pre-tax profits for last year, which came in at £114.7m.

Michael Sharp , chief executive of Debenhams, said: “As has been widely commented on in the media, the market was highly promotional in the run up to Christmas and we responded to these conditions to ensure our offer was competitive. However, this extremely difficult environment has inevitably had an impact on both our sales and profitability.

“Looking forward, I expect conditions to remain highly competitive as we enter 2014. Everyone in the organisation is focused on improving performance and growing the business, building on the four pillars of our strategy which I remain confident will lead to success over the longer term.”

Commenting, Feilim Mackle, director of sales and service at O2, said: “The contrasting fortunes of Debenhams and John Lewis illustrates just how important mobile and online shopping has become to a retailers’ revenue. With the introduction of our 4G service last year and ubiquitous connectivity, we are increasingly becoming a nation of smart shoppers, who, armed with mobiles and tablets have come to expect a seamless online and offline shopping experience.

“Our own research, The Mobile Future of British Retail, predicted a third of shoppers would use click-and-collect this Christmas. John Lewis’ results, whereby it’s seen a 60% year on year uplift in the service, has been a key factor in it winning the Christmas shopping war – and with it reaping significant financial gains. Those retailers who don’t put online and mobile at the heart of people’s shopping experience stand to be left behind.”

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