Debenhams reports profits increase but flat sales

DEBENHAMS has reported an 18.6% increase in pre-tax profits for the first half of the current year – a figure boosted by a strong performance from new store openings such as that in Kidderminster.

The £123.6m figure was ahead of market expectations and a boost for the sector in general, which has endured a torrid time during the past 18 months.

However, although profits were up, like-for-like sales were relatively flat, showing just a 0.3% increase.

The department store group said a number of factors could have played a part including, the weak trading environment overall, the poor winter and an ongoing strategy during the fourth quarter.

The latter, introduced to create more own-brand products at the expense of lower margin concessions is thought to have resulted in a 1.5% hit on sales.

Four new stores opened during the period, creating around 400 new jobs.

The new stores included a large outlet in Newcastle-upon-Tyne and a smaller branch in Kidderminster, which opened last September.

In the company’s results statement today, it said all the new stores had performed well and were either in line or ahead of expectations.

In other financial highlights, the company said gross transaction values had risen by 8.4% and net debt stood at £511.5m as of the end of February – a reduction of £415.7m compared with a year ago.

Operating highlights included a strong sales performance from its own bought ranges, particularly Designers at Debenhams, while it said it was making good progress improving its market share in childrenswear, menswear and home products.

It has also expanded its exclusive Designers at Debenhams portfolio with the launch of new brands such as Principles by Ben de Lisi and H! by Henry Holland.

Rob Templeman, Debenhams chief executive, said: “Throughout the last 18 months of recession, Debenhams has consistently achieved growth in sales, margins and trading profits.  

“We made further progress in delivering our strategy in the first half and are pleased with our performance.”
 
Looking forward, he said the group expected the trading environment to be broadly neutral during the second half.  

“We will maintain our focus on driving the business forward through self help measures to achieve our strategic goals and build on the good performance of the first half,” he added.

He said work done to improve its own bought ranges, including Designers at Debenhams, both in terms of product design, quality and value, would continue to help with margin expansion and market share growth.
 

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