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Debenhams' December sales hit new high

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Department store Debenhams recorded its highest ever December sales last month as like-for-like (LFL) sales jumped five per cent in the five weeks to January 5th 2013, according to results published today.

Noting that Christmas Day fell on a Tuesday, the retailer said that customers delayed shopping activities in the hopes of finding a bargain, helping the group to achieve record sales for the month.

Debenhams’ first Christmas brand advertising campaign for six years also boosted sales while the retailer highlighted the increased focus on promotions on the UK high street and said that its own promotional activity has led gross margin expectations for the year to increase by 10 basis points rather than the 20 previously guided.

In the 18 weeks to January 5th, LFLs grew 2.9 per cent on the same period last year while modernised stores, which traded for the first Christmas since refurbishment, performed strongly.

A total of 18 stores were modernised last year while its Chesterfield store opened during the quarter, taking the total number of stores to 155 and the department store is set to refurbish a further five in the year ahead, including its Oxford Street unit.

Internationally, Debenhams opened five stores over the 18 week period, including in Bulgaria and Georgia where it had yet to enter the market, taking its total to 73 and bringing it closer to the expected total of 150 over the next five years.

While the retailer’s bricks and mortar stores are faring well, online sales have rocketed over the period, up a significant 39 per cent on the same period last year.

Online sales accounted for 12.6 per cent of total sales compared with 9.3 per cent a year previously and the retailer warned that this strong growth, which is ahead of expectations, is likely to affect warehousing and distribution costs in the coming months.

“I am pleased with our performance in the first four months of our financial year,” Debenhams’ CEO Michael Sharp said of the results.

“The trading environment was extremely challenging but we focused on meeting the needs of our customers and executing the four pillars of our strategy.

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

“We continue to believe that whilst consumers have become acclimatised to the new economic reality, we don’t anticipate a significant change in consumer confidence in the remainder of the year.

“We remain committed to prudent investment in key areas of the business to deliver long-term sustainable growth as well as driving shareholder value.”

Such strong results echo the positive updates from competitors such as John Lewis and House of Fraser though Matt Piner, Research Director at analyst firm Conlumino, warned that the results are not necessarily indicative of a healthy high street.

“It’s important not to interpret this performance as a sign of rude health of the wider sector,” Piner said.

“Indeed, in such a difficult environment, Debenhams was forced to drop prices in order to compete, as the bargain-hunting appetite of shoppers pushed retailers into more extensive promotions.

“This has squeezed Debenhams’ margins, and it is unlikely to be the only business to have suffered from this problem.

“Moreover, while the three big department stores to have reported so far seemed to have played a blinder, it’s not an automatic certainty that other retailers have followed suit.

“These outperformers will have eroded the non-food sales of some of the value and mid-market players and even the grocers may well have lost out.

“Finally, with the rivals around it flying, the pressure on M&S to now follow suit is building and we await Thursday’s update with interest.”

Published on Tuesday 08 January by Editorial Assistant

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