Debenhams records rise in sales

Sep 16 2008

Department store chain Debenhams, one of the anchor stores at Liverpool One, allayed fears over trading today after reporting a “marked improvement” in business during August.

The company also said it enjoyed overall market share gains during the year to August 30.

Chief executive Rob Templeman unveiled a 0.9% fall in like-for-like sales during the financial year, which he described as “creditable” given the tough conditions.

“Trading in August showed a marked improvement over July but the UK retail sector continues to be adversely affected by wider economic concerns,” he added.

The firm’s full-year update follows a statement in June that was rushed out a week ahead of schedule amid speculation of double digit percentage sales falls.

Debenhams operates 139 stores in the UK and Ireland.

The company's shares opened 3% higher after City experts welcomed the reassuring update.

Freddie George, an analyst at Seymour Pierce stockbrokers, said the 0.9% decline for the full year pointed to a drop of 2% in the last couple of months.

“The full year trading update was encouragingly in line with market expectations and confirms that the company has picked up market share in apparel over the last year.”

He said he would not be changing his 2007/8 pre-tax profit forecast of £110 million, but warned that a more difficult trading environment in 2008/09 could see the company come close to breaching its debt covenants.

Debenhams said gross sales during the past year were up 1.3%, with gross profit margin flat compared to the year before.

The group said: “Market share gains were achieved in all major product categories.”

Two new department stores in Dunfermline and Blackpool opened in the last couple of weeks of August.

The full year like-for-like sales performance is a slight deterioration on the 0.7% fall during its first half. Recent surveys from the British Retail Consortium have painted a bleak picture of life on the high street due to a consumer spending slowdown.

Debenhams gave no detailed update on its estimated £1 billion debt position which has been an area of concern for analysts. The group was saddled with the burden after being floated by private equity owners in May 2006.

The group said its net debt position at August 30 was “expected to be in line with market consensus”.

Retail analyst Philip Dorgan of Panmure Gordon stockbrokers said today’s statement contained no surprises but a “clear indication that it has not breached its banking covenants”.

“Debenhams has not done a bad job in difficult circumstances,” he added.