Signs of a trading revival at Debenhams

Oct 24 2007 by Iain Laing, The Journal

DEPARTMENT store chain Debenhams has said its latest sales figures are offering early signs of a trading revival.

The retailer’s shares rallied 6% after it reported improved market share and said like-for-like sales had improved 2.1% since the start of September.

The performance at the start of its new financial year contrasts with the 5% sales drop reported for the previous 12 months, when declining margins also contributed to an 18.5% fall in operating profits to £194.1m.

As well as a review of its ranges, Debenhams has accelerated its store refurbishment programme and sought to improve its supply chain.

Chief executive Rob Templeman said: “Our new autumn/winter ranges are being well received and this, together with the refitting of stores and previous investment in a new IT platform and distribution centre, is improving the customer experience.”

Debenhams has 135 department stores in the UK and Ireland, as well as nine Desire by Debenhams stores, which offer a small store concept featuring a mix of womenswear, accessories, lingerie, cosmetics and childrenswear.

The group only returned to the stock market in May of last year after a lucrative flotation for its private equity owners and managers.

However, its shares have struggled as analysts questioned the company’s strategy, particularly its reliance on discounting and sale days.

This was felt in a reduction in margins for the past financial year, although the company said a review of its stores, brands and supply chain meant it was in a better position at the start of the new financial period.

Despite its “disappointing” trading year, Debenhams said pre-tax profits before exceptional items rose 13% to £127.5m.

Andrew Wade, a retail analyst at Seymour Pierce stockbrokers, said: “The real story though is in the progress, and impact, of the store refurbishment roll-out – 21 will be completed by Christmas – and whether management can get the product right.”

Last night shares closed up 0.24% at 103.75p