Almost £125 million was wiped off the value of Debenhams after the retailer issued a profits warning following poor festive sales.
The high street stalwart, which is often viewed as a barometer for how the retail sector is performing more generally, said the anticipated pre-Christmas rush to the tills had failed to materialise despite the heavy discounting of goods in its store and online sales channels.
In a downbeat interim statement for the 17 weeks to December 28, the firm said it now expected profits for the first half of the current financial year to come in at around £85m, almost £30m below the £114.7m made in the comparable period last year.
The update sent shivers down the spine of investors and shares in the retailer plummeted by more than 10% in early trading on Hogmanay.
And Debenhams finance boss Simon Herrick has stepped down from his post as chief financial officer with immediate effect, but will not leave the company formally until February 7.
The firm did not confirm his departure was linked to the profits warning.
However, it follows reports last week that Mr Herrick’s position at the group was under pressure amid shareholder concern over his performance.
He has been criticised over a so-called “Santa tax” letter hitting suppliers with demands for discounts days before Christmas.
Investors are also said to have been angered by guidance provided to analysts this year, with the City caught off guard by an earlier profits warning in March and unexpected costs revealed when full-year results were announced in October.
Debenhams said it had begun a search to find Mr Herrick’s replacement, with finance director Neil Kennedy taking on the role on an interim basis.
Mr Herrick will continue to be paid salary and benefits worth nearly £490,000 over a 12-month notice period, with up to £12,000 on top to cover legal fees.
Debenhams said it was battling against strong comparators from the first half of last year and had managed to increase gross transaction values by 0.7% in the period, with like-for-like sales also edging 0.1% ahead on the back of beauty, home and gifting sales.
However, clothing sales were weaker and online delivery income was lower than anticipated despite a 27% increase in digital orders in the period.
Internet-based revenues accounted for 15.6% of total group sales in the 17 weeks, up from 12.4% at the same point last year.
In its update, Debenhams said further heavy discounting activity would be taking place over the new year period in order to shift unsold Christmas stock.
“Gross margin declined in the 17 weeks due to product category mix and higher markdown,” the company said.
“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.
“Our expectation for gross margin for the first half is a decline of between 80 and 100 basis points.
“Costs increased in line with guidance provided in October and the measures we introduced to improve online efficiency and reduce fulfilment costs were successful.
“The above factors, combined with continued caution over consumer sentiment, means that we now expect profit before tax for the first half to be in the region of £85 million.”
Debenhams has previously set out four priorities for the use of cash business investment, payment of the dividend, reduction of net debt and the purchase of its own shares for cancellation but said that given current circumstances it had taken the decision to end the share buyback programme.
Chief executive Michael Sharp said he saw no immediate easing of trading conditions.
“The market was highly promotional in the run-up to Christmas and we responded to these conditions to ensure our offer was competitive,” Mr Sharp said.
“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.”