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Debenhams' healthy start fails to woo City

Debenhams' claim that reaction to its spring collection had been encouraging was met with caution by analysts this week.

The City dampened chief executive Rob Templeman's cautious optimism, following a 4.5% fall in like-for-like sales for the six months to March 3.

However, concessionaires at the department store chain told Drapers the season had started more positively than last year, confirming chief executive Rob Templeman's remarks that the new ranges had been encouraging.

One young fashion concessionaire said: "We've had a very strong start and like-for-like sales are up by high double digits. There are strong trends this year, such as tunics, which are very versatile and are being picked up by women outside the young fashion age group. Consumers can't get away with wearing what they had last summer because this year's trends are so strong."

But City analysts said they were concerned about its promotional strategy, including events such as its three-day mega Sale last week. Sources said this was a planned promotion, not a distress Sale.

Numis analyst Steve Davies said it would be dangerous to read too much into the positive trade. "I doubt trading over the next two weeks will be as good as the previous two because of the weather, and I'm not sure where the extra spend will come from," he said.

Investec analyst Mark Charnock said the positive start would slow as shoppers wait for promotions. "Shoppers expect another discount around the corner, but promotions have diminishing returns," he said.

Seymour Pierce analyst Richard Ratner said: "Young fashion has started well and if Debenhams gets the right styles it should get a boost. I'm hopeful but I wouldn't say confident, because it has done a lot of damage to the brand by all the promotions over the past few seasons."

Templeman said last week that although reactions to Debenhams' spring 07 ranges looked promising, it was too early to draw conclusions on their performance.

DEBENHAMS' TRADING UPDATE AT A GLANCE

Figures for the 26 weeks to March 3

Total sales: up 5.8%

Like-for-like sales: down 4.5%

Gross margin: up 0.4% to 42.5%

Store count: 132 UK department stores and seven smaller-format Desire stores

Retail space: 10.2 million sq ft

Number of planned new stores: 29

International store count: 32, with two more opening next month.

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