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Debenhams makes market share gains as interim profits rise

Department store group Debenhams has posted higher than expected interim profits after strong performances from its own-bought ranges and market share gains.

The retailer reported an 18.6% increase in profit before tax and exceptionals to £123.6m on sales up 8.4% to £1.42bn in the half-year to February 27. Like-for-like sales rose 0.3% during the period and gross margins were ahead 70 basis points during the period. EBITDA before exceptional items rose 5.9% to £194.2m.

Excluding the impact of the acqusition of Danish department store Magasin Du Nord in November, sales rose 1.7% and gross margin advanced 140 basis points.

Debenhams’ positive sales performance continued in to the second half with like-for-likes up 0.3% in the 31 weeks to April 3. Margins continued to be strong, the retailer said.

Debenhams chief executive Rob Templeman said the business had consistently achieved growth in sales, margins and trading profits during the recession and that the trading environment would be “broadly neutral” in the second half.

He said: “We believe that the work we have done to improve our own-bought ranges, including Designers at Debenhams, both in terms of product design, quality and value and increasing the own-bought mix, will continue to find favour with customers and provide a solid platform for margin expansion and market share growth.”

Debenhams reported that the latest Kantar Worldpanel fashion data for the 24 weeks to February 28 showed its total market share in clothing, footwear and accessories was stable. Debenhams increased its menswear market share by 20 basis points and childrenswear by 40 basis points.

Debenhams has been focusing on own-bought products, which deliver higher margins from lower sales densities. The retailer has been converting space from concessions to own-bought ranges since the fourth-quarter of last year, leading to an estimated hit of 1.5% on like-for-like sales during the current year.

Debenhams said that womenswear market share was “impacted by the move into lower sales density own-bought ranges and the ongoing underperformance of some of the remaining concessions”. The performance of own-bought womenswear was in line with management expectations during the half the retailer said.

Sales of Designers at Debenhams ranges rose 17.7% to £282.1m during the half. Own-bought sales increased 9.4% while concessions sales decreased by 22.5%. Own-bought sales accounted for 81.4% of sales in the first half, up from 75.6% in the same period last year. During the half, Debenhams launched Designers At ranges Principles by Ben de Lisi and H! By Henry Holland.

Multichannel sales during the half rose 85.9% to £50.6m as the retailer pushes its multichannel proposition.

Gross margin for the full year is expected to be flat including the performance from Magasin du Nord, or ahead 80 basis points excluding the Danish chain where the mix of concessions is higher.

The acqusition of Magasin du Nord contributed to £10.1m of a £49.4m capital investment during the first half. The acquisition and the acceleration of the retailer’s store refit programme in the second half of the year has resulted in an increase in capital expenditure guidance for the full year of £115m.

Debenhams said that it had also cut its debt burden by £415.7m in the past 12 months. Its net debt now stands at £511.5m.

 

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