Debenhams pleased with sales, despite 12% profits fall

Apr 15 2008

Debenhams said today it was pleased with its half-year sales performance, despite revealing a 12% fall in profits to £94.1 million.

The department store chain said it stole market share from rivals in the clothing sector, while its Designers at Debenhams ranges performed well against the backdrop of a tough retail sector.

Debenhams, which has 135 stores in the UK and Ireland, said it expected the environment to remain challenging, with like-for-like sales for the past 32 weeks down 1%, compared with a drop of 0.7% in the 26 weeks to March 1.

The chain generated total sales of £1.3 billion in the half-year, an increase of 1.2% overall after the company opened new department stores at Llanelli, Welwyn Garden City and Glasgow. It also re-sited stores at Exeter and Derby and opened a smaller format Desire outlet at Ballymena.

Another three stores will be opened in the second half of the financial year, including a flagship shop in Liverpool at the end of May.

Eighteen stores were refurbished during the first half, but Debenhams said some of the refurbishments scheduled for the current half-year would be deferred because of current market conditions. It said it wanted to avoid the “inevitable disruption to sales” caused by such work.

Today’s profits figure was slightly ahead of market expectations, despite margins coming under pressure from price changes in menswear and a shift towards lower margin business in the online and international businesses.

Debenhams was floated on the stock market almost two years ago - netting big profits for a private equity consortium of CVC, TPG and Merrill Lynch, which took the group private in December 2003.

The period of ownership massively increased the group’s debt burden, which made the group less attractive to institutional investors on its return to the stock market.

Debenhams shares have slumped to a third of their May 2006 float value of 195p, resulting in a series of takeover rumours.