Pre-tax profits at Debenhams for the first half were up 4.3% to £88.9m, ahead of analysts’ expectations that profit would remain flat on last year’s £85.2m. The department store retailer also cut its debts by £64.2m.
A promise to cut back on promotional activity at the almost always-on-sale retailer was emphasised in Debenhams’ plan to improve profits after a few tough years.
The British retailer has struggled as customers tightened their purse strings, putting pressure on Debenhams Boss Michael Sharp.
“I am pleased with the good progress we have made against the strategic priorities we set out last year. We have improved our multi-channel offer and successfully introduced the premium delivery options that we promised for the important peak period, which met with a positive response from our customers,” said the Chief Executive.
“The continued refocusing of our promotional strategy delivered a strong increase in full price sales, an improvement in value perception and enabled us to end the half with an improved stock position. Overall we delivered a good first half performance despite a difficult clothing season in Autumn and we are on track to achieve full year expectations” he added.
“Debenhams’ lukewarm performance is no worse than that of the other grande dame of the British High Street, M&S, but unlike its rival, it has no trump card – and no powerful food business to fall back on,” comments Paul Thomas of the retail consultants Retail Remedy.
“This is a retailer that has become highly reliant on promotions to drive sales – and while this price cutting has helped it boost sales volumes, its profit margin has stagnated all year. Its flagship locations have been made to look fresh and compelling, but many of its older stores are confused and tired.”
He continues “Debenhams has finally caught up with the pack with its online offering, and it has made respectable inroads into the fast fashion market – with its cheaper ranges managing to appeal to younger buyers.
Its reputation for decent quality helps it stand out from some high street rivals, but its foray into sportswear seems Quixotic when seen against the all-consuming momentum of Sports Direct.
As a venerable high street brand, Debenhams is far too old to be having a mid-life crisis. But it is clearly having to do some painful soul-searching – should it stick with the middle tier market it knows best, or ramp up the high volume, but fickle, fast fashion lines?”
“It hasn’t lost its way, but its path is strewn with an ever-growing number of strong rivals” finishes Thomas.