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Own brands boost Debenhams profits

Debenhams grew operating profit 7.1% to £196.1m during the year to August 28, helped by a strong performance from its own brand Designers at Debenhams ranges - and has announced four new designer collaborations.

The department store chain’s total sales jumped 9.6% to £2.56bn, taking into account the contribution of Danish department store chain Magasin du Nord, which Debenhams acquired during the period. Stripping out Magasin’s contribution, total sales edged up 1.4% to £2.37bn but like-for-likes were flat.

The 167-store chain’s headline profit before tax jumped 20.6% to £151m. It also reduced its net debt by £73.5m to £516.8m over the 12-month period.

Sales of Debenhams own brand ranges, which include H! by Henry Holland and Principles by Ben De Lisi, grew 15.4% on the previous year to £497.7m, outperforming concessions in the department store chain and delivering better margins.

The strong results for own brand ranges coincided with the news that Debenhams will launch collections by womenswear designers Jonathan Saunders and Preen and footwear and accessories designer Jonathan Kelsey for spring 11, as part of a new concept called Edition.

Edition will be used to house high street designs by a mix of new and established design talent, who will work with Debenhams for a minimum of four seasons. Womenswear designer Roksanda Ilincic - who last year launched a collaboration with premium womenswear chain Whistles - is also lined up to join the Editions concept but not until autumn 11.

Debenhams chief executive Rob Templeman said he was pleased with the group’s financial performance, and that the business should be judged on its profit growth rather than sales growth because it was a year of “structural change”.

“[We] believe that an increased in headline profit before tax of more than 20% on a one year basis and 37% on a two year basis is a creditable performance. We have now delivered five consecutive halves of profit growth despite the difficult trading environment,” he said.

Debenhams added that the cost pressure on its supply chain seen in the first half of the financial year continued into the second half, and that there was evidence of price inflation in the UK clothing sector.

It said the department store is managing stock levels tightly and that stock densities were down 0.5% despite the launch of new own brands.

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