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Mobile and e-commerce drive Debenhams’ sales growth


Department store group Debenhams has today reported an encouraging trading performance for the third quarter of its financial year, with its multichannel offering being the catalyst for its sales improvement.

Like-for-like (LFL) sales excluding VAT were up 1.5 per cent year-on-year for the period from February 26th to June 25th 2011, pushing up the year-to-date LFL trading figure announced in half-year results in April.

Online, in-store and mobile sales in first 43 weeks of the financial year we up 77 per cent year-on-year, excluding VAT, with today’s interim management statement indicating that Debenhams’ iPhone app has recently passed 500,000 downloads and has already recorded its first £1 million in sales.

The recently launched Nokia and Android apps are also proving popular, while the retailer says its Beauty Club app has been welcomed by existing customers and new adopters alike.

In what has been a tough June for retail, with a plethora of companies falling into administration, Debenhams performance so far this year will represent welcome news for investors.

Rob Templeman, CEO of Debenhams, who is set to leave the retailer at the end of the summer, said: “We are continuing to make progress despite significant headwinds in the sector and are pleased with the performance of the business in the year so far.

“Looking forward, we remain cautious about the consumer environment and will continue to focus on growing cash margin through our self-help strategy of investing in our store portfolio, developing a seamless multichannel business and managing our supply chain effectively.”

As well as putting a strong focus on multichannel development Debenhams is investigating ways it can use technology to improve its customers’ in-store experience with self-service checkouts currently being installed in all stores.

The company suggests that this point of sale format will be particularly beneficial in its smaller outlets such as Fareham, which opened earlier this month, adding to the other department stores which were unveiled earlier this financial year in Bath and Wakefield.

Debenhams said that cash margin remains the group’s key focus and so far during its second half it has invested some gross margin in driving top line growth, which resulted in higher LFL sales.

Gross margin for the full year is expected to be broadly neutral, and profit before tax (PBT) for the 12 months is estimated to be in line with the company’s expectations.

Commenting on today’s Q3 statement, Investec Securities analysts Katharine Wynne and David Jeary said: “Debenhams has yet again shown its dexterity at managing its cash margin through some judicious gross margin investment.

“While this means that our previous expectation of a full-year gross margin outturn similar to H1 (+20bps) will not be met, management has reiterated that FY11E PBT will be in line with its expectations.

“We will leave our FY11E PBT forecast unchanged, which is slightly ahead of consensus, and remain buyers.”

Published on Thursday 30 June by Editorial Assistant

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