Christmas sales boost Debenhams

Debenhams has reported stronger sales growth as customers sought bargains in the post-holiday clearance and responded to a new marketing campaign.

Sales at stores open at least a year rose 2.4% in the eight weeks ended Mar 3, the retailer said yesterday. Growth for the 26 weeks ended on that date was 0.3%, excluding VAT, the company said. Debenhams runs 170 stores in Britain, Ireland and Denmark.

Singer Capital Markets analyst Matthew McEachran said sales were “slightly better” than expected.

“This performance stems from having a differentiated strategy and tight supply chain, stock and cost management,” he said.

Debenhams chief executive Michael Sharp said the company is comfortable. He sounded a note of caution that the economy might effect profits.

“We are cautious about the health of the wider economy and the impact this may have on consumer behaviour.” Britain’s store owners are struggling to improve sales as sluggish spending and increased competition drives discounting.

The retailer maintained its forecast for an unchanged gross margin for its full financial year. For the first half, the company expects to report a 0.3% contraction in the profitability measure, Mr Sharp said. About 0.1% of that was due to a higher percentage of health-and-beauty product sales.

“Debenhams had a very strong January sale and cleared through the residues of last autumn and winter,” the chief executive said.

The retailer “measured the mindset of people looking for new season products,” helped by February’s rollout of the Life Made Fabulous marketing campaign.

The group said its Designers at Debenhams labels, including ranges by John Rocha and Jasper Conran, helped get its new season off to an “encouraging” start.

Mr Sharp said in January that discounting among competitors, including Marks & Spencer, was more intense than in previous years, as stores offered price cuts on winter clothing.

“We don’t assume we’re going to get any benefits from the economy in the balance of this financial year,” Mr Sharp said.

Shares were 2% higher yesterday. The group recently announced plans to open nine new stores over the next four years and modernise a further 25 outlets after claiming the high street was “alive and well”.