Debenhams Shares Take 9% Hit On Trading Woes

Investors have been abandoning Debenhams after it reported a fall in first quarter sales, despite an improved Christmas performance.

The country's second-largest department store chain said UK like-for-like sales fell 0.8% in the 19 weeks to 10 January.

However the firm, which has 240 stores and trades across 28 countries, said that over the four weeks to 10 January underlying sales were up 4.9%, with revenues boosted by less discounting and an improved online delivery offer.

Debenhams said trading was at record levels over Christmas week.

Chief executive Michael Sharp said: "I am pleased with our performance in the critical Christmas trading weeks, driven by our strength in a diverse range of product categories and a strong marketing campaign focussed on gifting.

"Our performance steadily improved following the well documented challenges in the clothing market in the autumn.

"We now have a competitive online proposition with next day delivery to home and next day click and collect, which customers took full advantage of and which performed well over Christmas.

"I would like to thank the whole Debenhams team for their tremendous efforts in delivering this performance."

Shareholders did not seem to agree that the trading update was positive, with Debenhams' value down 9% in early trading.

The announcement was made as figures compiled by the British Retail Consortium showed the industry suffered its slowest December growth in six years.

The body blamed a Black Friday spending rush in November for disrupting the "timing and rhythm" of Christmas sales.

Among other retailers reporting Christmas trading updates on Tuesday was ASOS, the online fashion specialist.

It said there was a 15% increase in like-for-like sales for the six weeks to 9 January - helping its share price grow 12% when the market opened following a tough 2014 that saw it hit by a damaging warehouse fire.

Greggs, the bakers, raised its full-year profit guidance while reporting an 8.1% rise in like-for-like sales for the five weeks to 3 January.

Its share price rose 6% when trading began.

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Morrisons Boss Quits After Festive Sales Fall

By Mark Kleinman, City Editor

The chief executive of Wm Morrison is to step down after a slump in Christmas sales led the grocer's board to conclude that a new leader was required to transform its fortunes.

Confirming an exclusive report on Sky News, Morrisons said that Dalton Philips would leave the company following its full-year results, with a search under way for his successor.

News of the change came as Morrisons reported Christmas trading figures which underlined its status as the also-ran among the big UK supermarket chains, with a like-for-like sales fall for the six weeks to January 4 of 5.2% including fuel.

Mr Philips said he would be leaving "a great company", adding that during his five-year tenure "many improvements (have been made) to the business and given Morrisons strong foundations for the future".

Morrisons also confirmed that Andrew Higginson, a former Tesco executive, would take over as its chairman from Sir Ian Gibson in January.

Mr Higginson said: "In the next chapter of Morrisons development, we need to return the business to growth. The board believes this is best done under new leadership. I would like to thank Dalton for his contribution as CEO. 

"He has brought great personal qualities and values to his leadership of the business, having had to manage against a background of considerable industry turmoil and change."

Mr Philips deserved "particular credit for facing into and dealing with the pricing issues that have now become evident, for taking the business into the convenience and online channels, and for the steps he has taken to modernise the company's operating systems," Mr Higginson added.

Morrisons' like-for-like trading performance was worse than the City had forecast, and placed the company firmly in the foothills of the battle for growth, with J Sainsbury and Tesco both reporting superior figures last week.

Mr Philips, a former executive at Loblaw, Canada's biggest food retailer, became Morrisons' boss in March 2010, and also sits on the board of the Department for Business, Innovation and Skills.

During his tenure, Morrisons has struggled to modernise its business in the face of tough competition from supermarket discounters and established rivals.

Last autumn, Morrisons announced thousands of job cuts and the introduction of a new loyalty scheme in a bid to stem the decline in sales.

When asked about Mr Philips' departure on Monday night, Morrisons said it did not comment on management changes.

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Smuggler Caught With 94 iPhones Taped To Body

By Sky News Beijing team

A smuggler has been detained in China with 94 iPhone handsets taped to his body.

The man's unusual posture as he walked caught the attention of customs officers in the city of Shenzhen as he tried to cross into China from Hong Kong on Sunday night, China's state media reported

Reports indicate he looked as though he was weighed down with something heavy, despite only holding two plastic bags. When the airport-style metal detector sounded as he passed through he was stopped and searched.

Images released by Chinese officials revealed he had taped the unboxed phones to his body and legs. The stash contained iPhone 6, 6+ and the older iPhone 5 handsets. 

iPhones are, on average, £80 cheaper in Hong Kong than they are in mainland China. High demand from Chinese consumers contributes to smuggling.

Ironically, all iPhones are made in factories on the Chinese mainland, including one plant near the port where the seizure was made.

The border between Hong Kong and mainland China is a notorious smuggling route. Electrical and luxury goods are often cheaper in Hong Kong than on the mainland. 

Baby formula is also often smuggled because of ongoing fears on the mainland about the safety of Chinese-made formula.

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Energy Bills: E.ON Cuts Gas Prices By 3.5%

E.ON, one of the so-called 'Big Six' energy firms, has confirmed it is to reduce its standard gas charge by 3.5% with immediate effect.

The company said the decision, coupled with a new one-year fixed dual fuel product it was also launching, represented a "risk" given Labour's pledge to introduce an energy price freeze should the party win May's election.

It insisted it had passed on to customers as much as it could, with wholesale costs having plunged by around 30% in the past year.

E.ON said the average reduction to its standard gas price was equivalent to two weeks' gas use or £24 off an annual gas bill.

The household supplier, which has 4.5 million residential customers, claimed the fixed product was the best on offer in the market at an average £923 annually and was available from today, saying it was open to new and existing customers.

Chief executive Tony Cocker said: "Today's 3.5% cut to our standard gas price and the launch of the UK's cheapest energy tariff, our one year fixed product, demonstrate that we fundamentally believe in doing the right thing for our customers.

"This is further evidenced by the fact we are the first supplier to reflect through our standard tariff the overall drop in wholesale gas prices this winter but also that, when our prices had to increase at the start of 2014 to reflect cost increases, for the second year running we announced later than any other major supplier and, on that occasion, at a lower average percentage increase level than any other major supplier.

"While oil prices have slumped, the gas price has remained volatile - some days up, some days down - and many of the other non-energy costs that we don't control but make up a customer's bill have increased and are set to increase further.

"However, today we've taken steps so we can make a price cut on our standard gas tariff at the same time as offering customers, existing and new, the chance to sign up to the UK's lowest priced energy tariff.

"As we have always said where it is possible we will try to pass savings on to our customers."

Wholesale gas costs fell 26% between the third quarter of 2013 and and the same period in 2014 and have fallen further since.

Sky News reported at the weekend that firms were reluctant to slash standard bills before May, given the fact that raw energy had been purchased at higher prices over years to ensure supply and the prospect of a looming price freeze.

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Sellafield Clean-Up Contract To Be Torn Up

A consortium is to be stripped of its contract to clean up western Europe's largest nuclear waste site at Sellafield following criticism of its performance.

Nuclear Management Partners (NMP), made up of US engineering group URS, British firm AMEC and French energy firm AREVA, was awarded an extension to its deal in 2013 despite accusations of delays and cost over-runs.

But the Government confirmed NMP, which employs 10,000 workers, will have its contract terminated.

The Nuclear Decommissioning Authority (NDA) will instead assume responsibility for the work to allow a "simplifying" of its relationship with the Sellafield project.

The cost of making the site, on the Cumbrian coast, safe has been put at almost £80bn over 120 years.

Sellafield was used in the 1950s to make plutonium for nuclear weapons before the country's first nuclear power station was built there.

NMP was handed a 17-year contract worth £9bn in 2008.

Energy secretary Ed Davey said: "Sellafield is the biggest and most complex nuclear site in Europe, so it's right that we keep the way it's being managed under constant review.

"We have seen great examples of how this approach can work with Crossrail and the Olympics - and I'm confident we'll see
similar results at Sellafield."

Amec said the NMP contract would be terminated at the end of 2016, adding that the NDA had confirmed it was not performance-related.

Its statement said: "It is vital that the lessons learned and the progress made since NMP were awarded the contract in 2008 should not be wasted.

"NMP has to date generated £650m of efficiency savings and met 96% of its targets last year while Sellafield's safety performance is now the best ever."

Gary Smith, national officer of the GMB, questioned the Government's role in the contract process.

He said: "We believe NDA wanted to terminate the contract in 2013 following a report it commissioned, but was overruled by ministers.

"Over £2bn has been spent with NMP since they extended the contract.

"Who is going to be held to account for extending the contract? GMB members, the community and taxpayers need to know."

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Inflation At Joint Lowest Level On Record

The annual rate of inflation has hit a 15-year low as oil costs continue to fall and supermarkets engage in a price war.

The Office for National Statistics (ONS) measured consumer price inflation (CPI) at 0.5% in December - its joint lowest level on record - slowing from a rate of 1% in the previous month.

The figure represents a further easing in the cost of living as wage growth is boosting consumer spending power and easily outpacing rises in costs.

The ONS said falling petrol prices and lower gas and electricity bills compared with a year earlier were the biggest factors pushing inflation down last month.

The cost of Brent crude is currently at six-year lows - trading on Tuesday at $45-per-barrel.

Video: Sub-£1 Petrol Boss Denies Gimmick

It represents a fall of more than half since last summer on a supply glut and fears for world economic health.

Flat household gas and electricity tariffs over the month - compared to a period last year when they were raised sharply - also made a major contribution to the drop in CPI.

Food and non-alcoholic beverages were 1.7% cheaper in December than the same month a year ago - driven by the intense price war between the major supermarkets under pressure from discounters Aldi and Lidl.

Core vegetable costs were over 7% lower.

Motor fuels fell 10.5% year on year with the price of a litre of petrol tumbling 13.6p between December 2013 and last month, with diesel 15p lower.

The plunge in CPI to below 1% triggers a letter of explanation from Bank of England governor Mark Carney to George Osborne because it is more than 1% off the Bank's 2% inflation target.

Video: Chancellor Welcomes Inflation Drop

But the Chancellor is unlikely to be worried that, ahead of May's election, prices are falling following a tough six years for voters in the wake of the financial crisis.

Price growth could ease further this month as energy firms begin to cut standard tariffs - with no sign of a rebound in oil and gas costs.

The Bank had previously said it expected CPI to fall below 1% and remain there for months to come.

But the sharpness of the decline brings the UK uncomfortably close to the scenario in the eurozone, where there are fears of a damaging deflationary spiral after inflation fell to -0.2%.

Deflation, which dogged Japan for more than 25 years, is seen as dangerous economically because consumers and businesses hold off on purchases on hopes goods and services will be cheaper in future.

Mr Osborne said: "Inflation is at its lowest level in modern times.

Video: Will Inflation Drop Help Consumers?

"We have family budgets going further and the economic recovery starting to be widely felt.

"We will always remain vigilant that we have lower inflation for the right reasons and today is yet further proof our long term plan is working."

Shadow Treasury minister Shabana Mahmood said: "Plummeting global oil prices are the reason why the rate of inflation is falling here in Britain.

"But wages continue to be sluggish and the squeeze on living standards since 2010 means working people are £1,600 a year worse off under this government."

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Petrol At £1 A Litre But Not At Supermarkets

The owner of three petrol stations in the West Midlands has cut the price of unleaded petrol below £1 a litre, as supermarkets announce further reductions.

The decision to sell petrol at 99.7p by Harvest Energy garages in Birmingham, Redditch and Walsall sees sub-£1 pump prices in the UK for the first time in more than five years.

Dr Velautham Sarveswaran, who runs the stations, claims he will still make money from the move.

"The supermarkets continue to make a fortune without passing the price cuts to their customers. It is a scandal. They are cheating people," he told MailOnline.

Unleaded petrol costs hit a five-year low last week of 109.8p - with figures provided by Experian Catalist showing that average costs on Sunday had reduced further to 108.9p.

Video: Brent Crude Could Go Below $40

Diesel stood just below 115p a litre.

Analysis showed that with an unleaded price of 99.7p, 57.95p of that figure would go to the Treasury in fuel duty and a further 18.3p would be paid in VAT, with the driver paying just over 20p for the product itself.

Lower petrol prices are a consequence of the plunge in oil costs - with Brent crude losing more than 50% of its value since June last year on a supply glut and fears for the strength of the world economy.

Brent was down at fresh six-year lows of $48.8 a barrel in Monday trading.

Supermarkets confirmed further reductions to their prices - with Tesco taking 2p off their petrol and diesel costs from Monday afternoon.

Asda, Morrisons and Sainsbury's confirmed similar moves from Tuesday.

For Asda customers, the latest reduction means they will pay no more than 103.7p a litre for petrol, with diesel at 110.7p.

While motoring groups welcomed the Harvest price, the AA said it "appears to be a publicity stunt rather than a reflection of general pump prices."

Its president Edmund King added: "There remains a postcode lottery out there when it comes to fuel prices.

"Drivers in rural areas are still paying much more than the 109p average price ... It will still take some time to get down to an average of £1 per litre."

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Malmaison Owner Begins Checkout From Hotels

By Mark Kleinman, City Editor

The owner of Hotel du Vin and Malmaison, two of Britain's biggest boutique hotel chains, has kicked off a sale process which is expected to draw interest from a range of international investors.

Sky News understands that KSL Capital Partners, which acquired Malmaison Group in 2012, and advisers at the investment bank UBS have begun circulating financial information about the company to prospective buyers.

The launch of the process is earlier than expected, and will lead to offers for the chains being lodged during the first week of February, according to insiders.

Malmaison's sale comes just two years after its former parent collapsed into administration.

KSL, a private equity firm based in Denver, Colorado, could opt not to pursue a sale if bids are not financially attractive, one source said on Tuesday.

Hotel du Vin and Malmaison, which trade from nearly 30 sites across the UK, were previously owned by MWB Group, which fell into administration in November 2012.

The hotels, which had been beset by poor financial discipline, installed Gary Davis, an experienced industry executive, as their new chief executive in 2012, since when sales and profit have each grown substantially.

Mr Davis remains executive chairman of the company in addition to a new role as chief executive of the Village hotels chain, which KSL acquired just before the end of last year.

Malmaison Group, which employs approximately 3,000 people, recently acquired the historic Cannizaro House in southwest London, and will invest £1m in renovating the property before reopening it under the Hotel du Vin brand.

Other sites, including Great Scotland Yard in Central London, are also in the process of being acquired, underlining the growth ambitions of the company's management team.

Hotel du Vin and Malmaison have become prominent players in the hospitality sector, specialising in converting well-known local landmarks such as a former castle prison, hospital and sugar refinery, into boutique hotels.

The chains, which were founded in 1994, are likely to appeal to private equity funds and other international hotel operators, according to .

KSL, which also owns The Belfry, one of the UK's leading golf courses, is also poised to complete the purchase of the Village Urban Resorts chain in a £480m deal.

Speaking at the time of KSL's £200m takeover in March 2013, Richard Weissmann, a partner at the firm, said of the two UK hotel brands:

"At KSL, we look for unique travel and leisure businesses with strong management teams to help support and grow. Malmaison and Hotel du Vin occupy a strong position in the UK market.

Malmaison declined to comment on Tuesday.

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Why Record Inflation Fall Is Not All Good News

How low is too low? That's the question economists are asking today after the Consumer Price Index (CPI) inflation rate dropped from 1% to 0.5%.

It's the lowest official inflation number for a decade-and-a-half, and the first time it has halved in the space of a month.

Moreover, with oil prices continuing to fall – now below $50 a barrel on the Brent crude international measure – the likelihood is that the CPI will only continue to fall.

At the very least it will drop to the lowest level since comparable records began in 1989. It may even drop into negative territory.

Should consumers be concerned? No. In the short term, this fall is good news – the equivalent of a tax cut for most consumers.

In fact, according to calculations by Capital Economics, the fall in petrol prices alone should put £455 back into the average household's pockets.

The fact that lower energy prices also push down a host of other costs should continue the 'tax cut' in coming months.

Moreover, with inflation at 0.5% it is now comfortably below the rate at which wages are increasing (1.6%, excluding bonuses) – so the longest squeeze on living standards since Victorian times is now at an end.

Finally, because inflation is well below the Bank of England's 2% target, it is even less likely to raise interest rates in the near future.

Market expectations for the date of a rate increase have now shifted from this summer to next spring. And the expected level in five years is now 1.4%, compared with 2% expected a couple of months ago.

That means more impetus for consumer spending in the coming months and, perhaps, an even stronger recovery later this year (though the near-term turbulence in Russia and elsewhere caused by falling oil prices might weigh on growth in the immediate future).

However, it's not all good news. There is good deflation and bad deflation. Good deflation, of the kind depicted above, is a temporary cut in prices – a temporary boost to consumers' real incomes.

No one changes their behaviour or spends less as a result – quite the contrary. Bad deflation is the kind witnessed in the US in the 1930s when prices fell for a prolonged period of time along with wages.

Because this deflation lasts longer, and is associated with weaker growth, it is trickier to shake off.

There are serious concerns this kind of deflation is taking hold in Europe – quite apart from recent oil-led falls. Indeed, in certain countries, such as Greece, this 1930s-style deflation is already quite evident.

Prices are now falling across the Eurozone, and if economists' forecasts are to be believed, they could stay low for some time.

That's why the European Central Bank looks likely to engage in full-blown quantitative easing either this month or soon afterwards.

The only question is quite how it has managed to structure the programme so it doesn't fall foul of the inflation hawks at the Bundesbank.

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Sainsbury's Cuts 500 Jobs In Office Shake-Up

Sainsbury's has become the latest major supermarket chain to announce cost-saving measures - with its cuts resulting in 500 job losses.

The chain, which had its worst Christmas in a decade amid the bitter price war with rivals, said the streamlining of its central operations would be  spread across all divisions and grades in its store support centres in Manchester, London and Coventry.

The steps form part of the £500m in cost savings outlined by the retailer in a strategic review published in November.

It had already announced plans to mothball a number of schemes in its property pipeline and intends to reduce the amount of money spent on new space over the next three years.

In a letter to staff, chief executive Mike Coupe said: "We want to work through this period of uncertainty as quickly as possible, while making sure we consult with colleagues who are affected by these changes.

"We're committed to treating all impacted colleagues with respect, during what we know will be a difficult time.

"I recognise that these changes will be difficult for our colleagues and I can assure you the decision to make them was not taken lightly.

"However, I'm certain that we will be in a stronger position to deliver our new strategy and better equipped to win in these times of change as a result."

The announcement followed confirmation from Morrisons earlier today that it was to close 10 loss-making stores. 

Last week, Tesco boss Dave Lewis announced plans for 43 store closures and the cancellation of 49 new stores in its pipeline as the industry comes to terms with the continued squeeze from discounters.

Industry figures released by Kantar Worldpanel showed that Aldi and Lidl at the bottom end - and Waitrose at the top - ate into the market shares of the so-called 'Big Four' chains in the 12 weeks to 4 January.

The major supermarkets have responded to the challenge by cutting prices alongside planned investment.

Sainsbury's has looked to cash in on the discount spree by partnering Netto in its return to the UK market.

Falling supermarket prices have been credited for helping inflation ease - with the price war backed by falling oil costs.

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