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Sharp sets out strategy as Debenhams records 10% profit increase

New Debenhams chief executive Michael Sharp has revealed his growth strategy for the department store, as the retailer’s full year pre-tax profit jumped 10% to £166.1m.

Like-for-like sales in the 53 weeks to September 3 remained flat, down 0.3% excluding VAT although total sales were up 4.5%. Total group sales hit £2.7bn.

Sharp unveiled his plans to make Debenhams an “international, multichannel retailer” following his strategic review of the business.

The department store is set to expand both in the UK and internationally. Domestically, where it has 163 stores, Sharp believes there is the potential for 240 stores. So far, one store is set to open next year, with a further nine signed for. Sharp said it is in discussions about 30 additional new stores.

It is also rolling out a store revamp programme with 45 stores set to be modernised in the next two years including its Oxford Street flagship.

Internationally the group is aiming to double its number of franchise stores to 130 over the next five years. International franchise sales were up 16.5% to £77m over the year. Sharp said that international acquisitions remain on the agenda.

The department store is to ramp up its multichannel activity and is to add new online-only brands and product categories. Over the year the gross transaction value of its online channel soared 73.8% to £180.4m. The retailer is close to completing the installation of new kiosks on every floor of every store.

In store, Sharp said the retailer’s focus will be on its brands and Designers at Debenhams would continue to be the “cornerstone” of this strategy. 

The retailer said it had experienced market share growth in all key categories over the year including womens casualwear, menswear and kidswear.

Designers at Debenhams sales increased by 5.3% to £523.9m while overall own bought products rose 2.9%. The retailer launched Edition, featuring some of the best young British designers, Diamond by Julien MacDonald and J Jeans by Jasper Conran over the year. Concession sales nudged up 1.1% year-on-year.

Sharp said: We have demonstrated the resilience of the department store model by trading well in a challenging market. It is right to remain cautious about the strength of consumer confidence over the next 12 months given the uncertain economic outlook. 

“We will continue to run the business with tight management of costs and stocks, retaining as much flexibility as possible in the supply chain to enable us to deal with whatever the market presents.” 

The retailer cut its net debt by £133.1m over the year to £383.7m. It intends to begin buying back shares in the second half of 2012.

  • Debenhams finance director Chris Woodhouse is standing down from his role and will leave the business next January. Woodhouse, who leaves to concentrate on his other business interests including his role as chairman of Agent Provocateur, will be replaced by Northern Foods group finance director Simon Herrick. Herrick previously worked at Kesa Electricals.

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