After a difficult few years for Debenhams, which saw the longstanding retailer suffer in comparison to competitor John Lewis, the company produced positive half year profits yesterday.
The results were titled “Good progress against strategic priorities” and revealed that the British department store chain witnessed a desirable pre-tax profit of £88.9m from £85.2m – up 4.3% from 2014.
Net debt decreased from £64.2m to £297.3m, while shares rose 5% on Thursday after the news that Debenhams had recovered its profits.
Craig Sears-Black, UK MD of supply chain process platform Manhattan Associates commented:
“The results show that Debenhams is benefiting from innovation in its Multi-channel business. It has made changes to its retail estates and building out its multi-channel capabilities to better suit the needs of customers means finding greater profits, not simply more sales. Customer demands are higher than ever before, and the most innovative retailers are tuning their business for the complexities of multi-channel and omni-channel retail. This means integration and optimisation across supply chain, stores and staff to make sure customer demands are met, but also that profits are maximised.”
Debenhams’ results can be put down to expansion, third-party retailers, fewer promotions and its increase in mobile traffic.
The company expanded in the last half year, opening two new stores in Scunthorpe and Borehamwood. The moves resulted in a net footage increase of 53,000sq ft.
Debenhams has said that it will focus on giving more shop space to some of its top third party retailers. This includes Jack&Jones, Costa Coffee and Sports Direct. Sports Direct will have 16 concessions within the department store chain by the middle of 2016 – a positive investment since fitness apparel is up by 203% since 2013.
Expansion was also key abroad, with the end of the period counting for 85 international Debenhams stores. This equated to 68 franchise stores across 24 countries.
Avoiding overly discounting products was also beneficial, with timing playing a more important role. The new season’s clothing ranges were set to tie in with pay day. This pushed profit by £3m.
Online sales were vital, as they increased by 12.7% to £271.8m. This accounted for 17% of GTV in the half – up from 15.4% the previous year. Traffic to the Debenhams website increased by 6.6% to 158m, including a 34% increase in visits from mobile devices, with mobile now accounting for 42% of online sales.
The company is plotting further expansion to continue its positive results, contracted to open 11 new franchise stores in the next three years, it will remain innovative and time conscious to ensure future growth:
“Accordingly we are continuing to plan prudently in the near term, while remaining focused on our strategic priorities, and are continuing to invest to ensure that our business is well-positioned to drive sustainable growth in the longer term.” Michael Sharp, Chief Executive of Debenhams said.