H1 sales up at Debenhams; returns of Principles

17 Mar '10

5 min read

Debenhams plc, the leading department stores group, releases a trading update for the first half of its financial year which comprises the 26 weeks ended 27 February 2010.

We are pleased with our first half performance. We have continued to deliver on the strategy laid out 18 months ago to grow the business by focusing on measures to expand margins and gain market share whilst at the same time continuing to invest in future development. We have now delivered profit growth on a consistent basis for the past 18 months.

Rob Templeman, Chief Executive of Debenhams, said:
“We are pleased with our first half performance which shows continued progress in delivering our strategy. In 2009 we were one of only a handful of retailers to increase sales, margins and profits and we have done so again in the first half of 2010. Against the backdrop of challenging trading conditions, we have delivered profit growth on a consistent basis for the past 18 months.

“In the second half we will continue to focus on our self-help measures. The impact of the disruption we saw in the fourth quarter of last year due to the closure of concessions and the significant space shift will start to dissipate and we expect to benefit from enhanced space productivity in the second half from our new brands. Our strong own bought offer, not least the successful and exclusive Designers at Debenhams brands which bring the catwalk to the high street, will remain our key driver of growth.”

Gross transaction value (excluding Magasin du Nord) for the 26 weeks was 1.7% higher than the same period last year. Like-for-like sales increased by 0.3% over last year in the first half. In the eight weeks since the Christmas trading update, we have seen an improving trend in terms of like-for-like sales and gross margin.

A significant strand of our margin expansion strategy is to increase sales of own bought products whereby higher own bought margins more than offset lower own bought sales densities. In the fourth quarter of last year we undertook extensive in-store space moves to create space for both new and expanded own bought brands by reducing concession space. We estimate that there is a detrimental impact on like-for-like sales resulting from these moves of some 1.5% throughout the current financial year.

Gross margin for first half was significantly higher than last year as a result of our strategy to focus on the drivers of cash gross profit, principally the higher own bought mix and careful stock control.
As a result of higher sales and gross margin, EBITDA and profit before tax for the first half are both expected to be higher than last year and in line with market forecasts.

Stocks continue to be tightly controlled. Despite disruption to sales in early January due to the weather, terminal stocks ended the half at a new historical low of 2.64%.

Progress continues to be made in terms of market share.Menswear and childrenswear share both increased (source: Kantar Worldpanel Fashion 24 weeks market share data to 31 January 2010 vs. 2009) as did our home market share (source: GFK). In womenswear, as anticipated market share for this period was impacted by the strategic move from concessions to own bought. We were pleased with the underlying performance of own bought womenswear.

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