Debenhams has forecast a rise in annual profits, despite a revamp of its department stores impacting sales.
The department store chain, which will complete the conversion of 530,000 sq ft of trading space from concessions to own-label by the end of the month, said that like-for-like sales fell 3.8% in the second half of the year to August 29. This compares with a decline for the full year of 3.6%.
The department store said that added cost controls and better stock management meant that it was on course to meet profit expectations for the year, even in the face of “difficult and volatile trading conditions”.
Gross transaction value for the year was 0.2% higher than the previous year.
The retailer said the shortfall in like-for-like sales has been “more than offset” by strong gross margin performance which improved “significantly” as the year progressed.
Debenhams said that the Designers at Debenhams range and own-bought ranges were the best performing categories over the year and were key drivers of a year-on-year gross margin gain of 70 basis points.
The retailer announced today that it has signed designer Henry Holland to its Designers at Debenhams offfer.
The H! BY Henry Holland young fashion range targets 17-25 year-olds and will be found in 60 stores and online in spring 10. It will feature Holland’s famous bold prints and bright colours and the range is priced from £5 to £60 and will occupy 800 sq ft of space in womenswear.
At the year end, Debenhams, which has 144 department stores in the UK, said that £61.4m of debt had been repurchased at an average discount of 5.6%.
Chief executive Rob Templeman said: “We believe that the increase in profits in a year which has seen some of the most difficult and volatile trading conditions in recent times is a creditable performance.”
He added that it would be “difficult” to predict consumer behaviour.
He added: “Although it is early days, we are encouraged by the launch of our new brands which we expect to benefit gross margin during the course of the year. We will continue to focus on the drivers of cash profit during the year.”