Debenhams ‘pleased’ with half-year sales performance

DEPARTMENT store chain Debenhams overcame a challenging winter for retailers as it revealed a “pleasing” performance for half-year sales.

The group, which has 167 stores in the Britain, Ireland and Denmark, expects to meet the city’s profit forecasts for the six months to February 26.

Debenhams’ shares jumped 4% as analysts said the group’s strategy of boosting margins by sourcing more of its own designer brands continued to pay off in a market impacted by weather disruption and weak consumer confidence.

Matthew McEachran, a retail analyst at Singer Capital Markets, said: “Trading in the final seven weeks of the half-year was significantly better than others in the sector and gross margins continue to track up.”

Debenhams recently launched a nationwide campaign advertising its ranges of clothes and accessories from designers including Jasper Conran, Jonathan Saunders and Jonathan Kelsey.

Like-for-like sales in the six months to February 26 were down 1.5%, a slight deterioration on figures released in January, as consumer spending came under pressure from an increase in VAT to 20% from 17.5%.

But Debenhams said headline profits in the half-year increased after it grew its margins by sourcing more of its own goods and it benefited from lower interest charges.

Analysts expect Debenhams to make about £128 million (€147m) in headline profits in its first half, compared to £123.6m a year ago.

Chief executive Rob Templeman said the performance was pleasing in light of the trading environment but warned the next six months would continue to be difficult.

He said: “Looking forward, it is clear that disposable income is under pressure from inflation, public sector spending cuts and higher taxation.

“We will continue to pursue the self-help measures we have been working on over the past two years.”

Debenhams’ half-year figures were also affected by the snow in December, which wiped as much as £30m from sales, according to some estimates.

The company is also battling rising inflation, with clothes particularly badly hit after cotton prices doubled.

Freddie George, an analyst at Seymour Pierce, said: “The trading update is encouraging considering the concerns about the economic headwinds on consumers’ disposable incomes as from the start of 2011.”

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