Designs on the high street

While M&S is finding fashion a tough sell, exclusive and affordable ranges are helping Debenhams to expand

It was a view not shared remotely by Debenhams' management but around the time of the Woolworths collapse nearly four years ago the department store chain was cited as a possible retail casualty. After all, its share price had sunk to 22.5p in December 2008 – a country mile from its float price of 195p in May 2006 – and despite often robust trading, the City was obsessed by its almost-£1bn of net debt.

Following another set of strong trading figures yesterday, such views seem to be from a bygone era, as Debenhams has emerged as one of the retail winners of the consumer downturn. The retailer delivered an accelerated 3.8 per cent rise in like-for-like sales over the 10 weeks to 1 September after it powered through the wettest summer on record.

Michael Sharp, who became chief executive in September 2011, said: "This shows just how resilient Debenhams has become. Customers kept coming in because they like the unique products and brands."

Debenhams is forecast to grow its annual profits by 2 per cent to £160.2m in 2011-12, according to Peel Hunt, leaving many of its retail rivals looking down the high street enviously.

The retailer, which traces its roots back to 1778, has engineered this turnaround by pulling a series of self-help levers, such as expanding its number of exclusive Designers at Debenhams and other own-brand ranges, pushing online and refurbishing its stores.

More simplistically, it has also given female shoppers fashion that they want at the right price, which it not something that rival Marks & Spencer has demonstrated recently.

For instance, Debenhams grew its share of the womenswear market by 0.2 percentage points over the 12 weeks to 5 August, according to Kantar Retail. However, retail historians will also look back at the £323m rights issue it completed in 2009 as a crucial step in slashing its debt and associated painful annual interest-rate payments.

Mr Sharp, who joined Debenhams as trading director in 1997, says: "The refinancing in 2009 was very much the start of progress in the right direction for the balance sheet."

Debenhams' much lower current net debt of £370m has given it the freedom to invest robustly, with its store opening and refurbishment programme among the most eye-catching. While much of the high street cuts its store estate, Debenhams plans to open 14 new department stores over the next five years, adding 7 per cent of new trading space

The group, which has 240 shops across 28 countries, has also refurbished 18 stores in the UK in the past nine months.

Impressively, its modernised stores are delivering an average sales uplift of about 6 per cent inside the first year and a further 1.5 per cent over the second year. John Stevenson, an analyst at Peel Hunt, says: "The refurbishment programme is starting to gain traction and it does have a big impact, particularly on the new perfume and health and beauty areas. It is a big driver of footfall into stores."

Associated with the refurbishment programme, Debenhams has made a huge push over the past two years to increase the volume of own-brand products sold in stores, which give it better margins than concessions.

This has been particularly pronounced in categories such as female shoes, boosted by its acquisition of Faith in 2010.

Two years ago, 90 per cent of Debenhams' women's footwear sales came from concessions and 10 per cent was from own-brand but now the split is around half for each.

At the heart of Debenhams' own-bought strategy are its Designers at Debenhams products, which it launched in 1992. It yesterday added Marios Schwab to its list of more than 20 designers.

Such ranges are also powerful drivers of online sales at Debenhams, which jumped 40 per cent in the past year. The chain gave its online operations a boost earlier this year by introducing its "endless aisles" initiative, which is intended to increase fulfilment by using stock from its biggest stores, as well as dedicated warehouses, to meet demand on the internet.

Beyond these shores, Debenhams has aggressive plans to nearly double its number of franchised stores from 67 in countries from India to Vietnam to 130 in five years. The group opened its first store in Russia on 1 September and Mr Sharp says overseas is "increasingly important" for the retailer.

However, it wasn't all rosy for Debenhams over the past 12 months, as it said its gross profit margins fell by 30 basis points. It blamed this partly on people buying more lower-margin health and beauty products during the wet summer. And despite its shares closing at 99.2p yesterday – up by more than two–thirds in the last year – Debenhams remains a long way from its 2006 float price.

But overall, the retailer has defied the doom merchants over recent years and it appears to be a hive of activity at present.

Mr Stevenson says: "If you look at the self-help opportunities compared to Next and Marks & Spencer, on the face of it there seems to be lot more going on at Debenhams in terms of driving core profitability."

News
Jeremy Paxman has admitted he is a 'one-nation Tory' and complained that Newsnight is made by idealistic '13-year-olds' who foolishly think they can 'change the world'.
peopleThe idea has been greeted enthusiastically by the party's MPs
News
Michael Buerk in the I'm A Celebrity jungle 2014
people
Voices
File: David Cameron offers a toast during a State Dinner in his honour March 14, 2012
voicesAnd nobody from Ukip said babies born to migrants should be classed as migrants, says Nigel Farage
Arts and Entertainment
Avatar grossed $2.8bn at the box office after its release in 2009
filmJames Cameron is excited
PROMOTED VIDEO
Arts and Entertainment
Stik on the crane as he completed the mural
art
News
Happy in his hat: Pharrell Williams
people
Arts and Entertainment
Stella Gibson is getting closer to catching her killer
tvReview: It's gripping edge-of-the-seat drama, so a curveball can be forgiven at such a late stage
News
Brazilian football legend Pele pictured in 2011
peopleFans had feared the worst when it was announced the Brazil legand was in a 'special care' unit
News
i100(More than you think)
Sport
Brendan Rodgers seems more stressed than ever before as Liverpool manager
FOOTBALLI like Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
News
ebooksNow available in paperback
News
The Magna Carta
archaeologyContemporary account of historic signing discovered
News
Phyllis Dorothy James on stage during a reading of her book 'Death Comes to Pemberley' last year
peopleJohn Walsh pays tribute to PD James, who died today
Sport
Benjamin Stambouli celebrates his goal for Tottenham last night
FOOTBALL
Life and Style
Dishing it out: the head chef in ‘Ratatouille’
food + drinkShould UK restaurants follow suit?
News
peopleExclusive: Maryum and Hana Ali share their stories of the family man behind the boxing gloves
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Argyll Scott International: Service Desk Analyst

£20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...

Argyll Scott International: 2x Service Desk Analyst

£20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...

Recruitment Genius: Senior Execution Trader

£30000 - £250000 per annum: Recruitment Genius: A global Rolling Spot FX, Comm...

Citifocus Ltd: ACA - Financial Reporting

£Attractive Package: Citifocus Ltd: Chartered accountant (ACA or CPA), must be...

Day In a Page

Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

Christmas Appeal

Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

Is it always right to try to prolong life?

Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

What does it take for women to get to the top?

Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

Knitting pretty: British Christmas Jumpers

Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

French chefs campaign against bullying

A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

Just what you need on a New Year hangover...

Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
Cuba set to stage its first US musical in 50 years

Cuba to stage first US musical in 50 years

Claire Allfree finds out if the new production of Rent will hit the right note in Havana
Christmas 2014: 10 best educational toys

Learn and play: 10 best educational toys

Of course you want them to have fun, but even better if they can learn at the same time
Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

Paul Scholes column

I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

Lewis Moody: Lancaster has made all the right calls – now England must deliver

So what must the red-rose do differently? They have to take the points on offer 
Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game