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By
Reuters
Published
Sep 18, 2012
Reading time
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Debenhams puts rivals in shade with sales rise

By
Reuters
Published
Sep 18, 2012

LONDON - Debenhams, Britain's No. 2 department store group, showed its resilience to weak market conditions, posting an acceleration in underlying sales growth this summer when rivals, including Next, saw a drop off in trade.


Debenhams

With Britain in recession many retailers have been finding the going tough as disposable incomes are squeezed by government austerity measures and with wages growth not keeping up with rises in prices.

Debenhams has bucked the gloomy trend, helped by its breadth of products, broad range of customers, multiple routes to market and increased marketing spend.

The group, which trades from 167 stores in Britain, Ireland and Denmark, and over 60 international franchise stores, said on Tuesday it would meet analysts' consensus expectations of about 156 million pounds ($254 million) for the year to Sept. 1 pretax profit, up from 152 million pounds in 2010-11.

It said sales at stores open over a year rose 3.7 percent, excluding value added tax (VAT), in the 10 weeks to Sept. 1.

That compared with a rise of 3.1 percent in the 16 weeks to June 23 and took the increase for the year to 1.6 percent - ahead of analysts' consensus expectations of up 0.6 percent.

The firm won market share in womenswear and grew or maintained share in all other areas.

Chief Executive Michael Sharp told reporters he expected Debenhams to continue to deliver like-for-like sales growth in its new financial year and said he was encouraged by the start to the autumn/winter season.

Debenhams' performance contrasted starkly with Next, Britain's second largest clothing retailer, which said last week that sales in August and early September had been "disappointing", and clothing market leader Marks & Spencer which lost womenswear market share in its first quarter.

"We saw no slowdown at all in August," said Sharp.

He said Debenhams' variety of product categories, a core clothing offer supplemented by accessories, homewares and health and beauty, meant it was less exposed than other retailers to the vagaries of Britain's weather.

"If the sun's shining or it's raining we have more tunes to play across the product range than many other retailers," said the CEO.

Debenhams said its 2011-12 gross margin would be in line with guidance of 30 basis points lower than 2010-11.

That reflected a higher proportion of lower margin health and beauty and clothing concession sales in the overall sales mix rather than any increase in promotional activity.

As well as refurbishing stores, Debenhams plans to open 14 new stores over the next five years, adding 7 percent to trading space and driving incremental sales of about 180 million pounds. It also sees an opportunity for a further 76 UK stores.

Shares in Debenhams, up 77 percent over the last year, were up 0.1 percent at 0837 GMT, outperforming a 1.1 percent fall in the FTSE Mid 250 index, and valuing the firm at 1.26 billion pounds.

MOMENTUM

"With the refurbishment programme, online initiatives, margin upside, new space opportunities and a good start to autumn/winter, Debenhams continues to exhibit more momentum than its competitor set," said Peel Hunt analyst John Stevenson.

Sharp does not envisage a change in the economic outlook for the British consumer any time soon.

"The new financial year is all about what we do to make a difference... We can't rely upon any benefit coming from the economy because there's no clear signs yet of any form of improvement," he said.

He said he would welcome government initiatives to get young people back to work.

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