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Why Shares In Debenhams plc Plummeted

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: Shares in Debenhams (LSE: DEB) slid by more than 12% in early trade this morning, following a warning from management that the Christmas period did not “experience the anticipated final surge in sales in the last week of the [Christmas sales] period”.

So what: The forecast for pre-tax profits has now been realigned, with a mooted figure of £85m down from the previously anticipated £110m for the six months to April 2014. 

The department store blamed a highly competitive market and an “unprecedented level of promotional activity”, as a result of continued pressure on household incomes and declining footfall as more shoppers hunt for their bargains online.

Now what: Debenhams brought this trading statement forward from 17 January in light of the negative news, although there were some rays of lights: online sales increased by 27% for the 17-week period to 28 December 2013, while “the measures [Debenhams] introduced to improve online efficiency and reduce fulfilment costs were successful”.

Chief executive Michael Sharp commented:

“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.”

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> Sam does not own shares in Debenhams. The Motley Fool owns shares in Debenhams.