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Debenhams profits up as sales grow 1.4%


Department store group Debenhams has today reported that its half-year profits have grown ahead of market expectations thanks to robust trading.

In spite of difficult trading conditions like-for-like sales during the 26 weeks to March 3rd 2012 grew 1.4 per cent including VAT, and were still up 0.3 per cent once VAT had been stripped out.

Group profits over the half year period totalled £127.1 million, an increase of 1.4 per cent, despite gross margins being cut 30 basis points thanks to stronger sales in its lower margin health & beauty division.

Michael Sharp, CEO of Debenhams, commented: “We are pleased with our results for the first half, with profit before tax ahead of market expectations despite the challenges presented by the overall retail climate and unfavourable weather conditions in the autumn.”

Progress has been made both in its multichannel & international operations over the first six months of the financial year, however Debenhams has keen to remind the market today that its UK store base will be the group’s single largest sales channel for the foreseeable future.

With that in mind, the retailer has committed to modernising 45 of its core stores within the next two years and currently has 14 new outlets in its pipeline, the first of which to open is in Dumfries, Scotland next month.

Disruption caused by refurbishment work had a negative impact on sales during H1 and this is expected to become more pronounced in the second half of the year as the modernising work steps up a gear.

The group is still on course to meet full-year expectations and has managed to reduce its net debt by £39.8 million from the same period last year so that it now totals £351.6 million.

“At this stage we remain comfortable with the market’s current outlook for the full year,” Sharp added.

“However, we are mindful of the impact the wider economy may have on consumer behaviour in the second half of the year as well as the uncertain effects of the major one?off events taking place in the UK during the summer.”

In multichannel, the retailer has installed in-store kiosks at all of its stores to improve availability and it also claims that 20 per cent of its online traffic is now driven by mobile devices.

Two new Debenhams stores in the Philippines and one Iran opened during the half while international franchise stores increased their gross transaction value by 23.5 per cent to £44.1 million in the period.

The retailer now has 67 franchise outlets in 25 countries, has two opening in India and one Pakistan over the next half, and has set the ambition of operating 130 of these type of stores by 2016/17.

Magasin du Nord, the leading Danish department store group purchased by Debenhams in 2009, posted a 1.7 per cent increase in LFL sales over the half.

Published on Thursday 19 April by Editorial Assistant

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