Department store Debenhams (DEB) reveals a disappointing 0.2% drop in like-for-like sales for the third quarter to 11 June, unhelpful weather depressing clothing sales in March and April.

Analysts nudge down estimates on news full-year gross margins will now be flat rather than in modest growth amid toughening clothing market conditions, a revelation that sends the shares 5.2% lower to 70.4p.

CEO Michael Sharp (pictured below), who steps down on Friday after five years in the hot seat, is unable to depart Debenhams on a high, Britain's second biggest department store struggling for growth in a UK trading environment that has weakened since the new year, particularly for clothing.

CEO - Michael Sharp

Sharp also bemoans a mixed performance within the international division, where Magasin du Nord's growth 'has slowed somewhat, reflecting similar trends in Denmark to the UK'.

Debenhams insists that with the help of cost cutting, it still expects to generate full-year profit before tax 'within the range of market forecasts', though Cantor Fitzgerald Europe downgrades its 'top end of the range' forecast from £120 million to £110 million and published price target from 85p to 70p.

Under Sharp's stewardship, Debenhams has attempted to wean itself off discounts while building its non-clothing categories such as beauty ranges. In addition, it has expanded abroad and successfully grown its online business, Q3 sales up 7% with Debenhams seeing positive trends in mobile and strong growth in Click & Collect.

Yet meaningful growth continues to prove elusive on the distressed UK high street, Debenhams is still finding its discounting habit hard to kick and incoming boss Sergio Bucher (pictured below), the vice-president of Amazon's (AMZN:NDQ) European fashion business who takes over in October, has a big job on his hands.

CEO - Sergio Bucher

Evidently, the structurally-challenged retailer has too much selling space, since it has been introducing concessions in its under-used stores with brands including Sports Direct (SPD) and Jack & Jones and with Claire's Accessories launching in fifteen stores. Debenhams has also been slotting in branded food offers through tie-ups with Costa Coffee, Patisserie Valerie and Chi Kitchen among others in a bid to drive footfall and increase shopper dwell time.

Web chart - DEBENHAMS - June 2016

Today, the embattled retailer also reveals that 'Westfield White City will increase its food offers to three with the opening of Italian restaurant concept, Franco Manca and we are planning to launch another new casual dining partnership in our modernised Lakeside store.'

Issue Date: 22 Jun 2016