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Debenhams sales improve after difficult Xmas

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Department store retail group Debenhams has reported flat like-for-like (LFL) sales including VAT for the first half of its financial year, in results released today.

Excluding VAT, group trading decreased 1.5 per cent LFL year-on-year but with margins increasing this marks an improvement from the 19 weeks to January 8th 2011 when LFL sales dropped 2.5 per cent thanks to Britain’s adverse weather.

Magasin du Nord, the Danish department store purchased by Debenhams at the end of 2009, reported LFL sales up 9.3 per cent on a Danish kroner basis and 3.9 per cent in sterling.

Rob Templeman, CEO of Debenhams, commented: “Our performance in the first half has been pleasing given the difficult trading environment.

“Our strategy of increasing own bought sales, as well as focusing on profit and cash generation, has again delivered margin gains despite the significant headwinds being experienced in the clothing sector supply chain.”

Debenhams Direct, the group’s multichannel offering, saw sales increase 82.4 per cent during the first six months, with an iPhone app and Debenhams TV being launched during the period.

In February the group launched a new ad campaign to promote the various designers now working for the company, with collections from Jonathan Saunders, Preen and Jasper Conran all introduced in the half.

Although sales did not increase year-on-year during the period, analysts Katharine Wynne and David Jeary from Investec Securities argue that against the rest of the market Debenhams performance is positive.

“As the Magasin contribution has slowed from 5.5 per cent in sterling terms to 3.9 per cent for H1 overall, this implies that the UK performance may have slightly improved from the -2.5 per cent LFL after 19 weeks, and compares with our estimate of clothing industry declines of 2-3 per cent in January/February,” Wynne and Jeary commented.

“With margins up slightly (20 base points, we believe), the company has indicated it should meet consensus estimates for H1 profit-before-tax, which it sees at £128 million against our £130 million estimate.”

Between four to six refits are planned during H2, a department store in Wakefield and a Desire store in Fareham will open, and construction of a new distribution centre should be completed by the end of the calendar year.

Templeman added: “Looking forward, it is clear that disposable income is under pressure from inflation, public sector spending cuts and higher taxation. As a result, trading across the UK high street is likely to be difficult in the second half of the year.

“We will continue to pursue the self-help measures we have been working on over the past two years - driving market share and cash margin through own bought product ranges, increasing multi-channel access points, improving the in store environment through refits - which will be beneficial to the business whatever the trading environment.”

Published on Tuesday 15 March by Editorial Assistant

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