Debenhams welcomes a ‘creditable’ performance

Sep 17 2008 by Tony McDonough, Liverpool Daily Post

DEPARTMENT store chain Debenhams has pleased the City by reporting a ‘marked improvement’ in business during August – but the group expects trading to remain tough over coming months.

The retailer, which opened a new flagship store in Liverpool One in May, also dismissed market fears over its financial health, saying it gained market share 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.

He said: "We're taking the view that certainly the next six to 12 months are going to be tough. When you look at what's happened in just the last few days, all of that doesn't help.”

The update caused Debenhams’ shares to rise by more than 9% yesterday morning. They closed up 2.9% at 44p.

Debenhams operates 139 stores in the UK and Ireland, including Browns of Chester and stores in Warrington’s Golden Square Shopping Centre and Southport’s Lord Street.

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

Debenhams gave no detailed update on its estimated £1bn 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”.

Mr Templeman said Debenhams was a ‘highly cash generative business’ and dismissed market rumours that it could breach its banking covenants.

He said: “The one thing that Debenhams has always done is surprise people on the positive side about its debt position."

Freddie George, an analyst at Seymour Pierce stockbrokers, said he would not be changing his 2007/8 pre-tax profit forecast of £110m.

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

alistairhoughton