Debenhams to start selling on the Internet

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DEBENHAMS, the department store group that was de-merged from Burton just over a year ago, will start selling goods on the Internet in the autumn as it steps up its interests in electronic commerce.

Debenhams already has a web site and it plans soon to upgrade its wedding list service so that items can be ordered on the Internet. It will make more regular merchandise available for Internet ordering and is also planning to extend its Internet cafe concept, which is currently a single outlet in central London.

In addition, Terry Green, chief executive, said Debenhams was holding "initial discussions with third parties to set up joint ventures either related to the Internet or digital television."

The comments came as Debenhams reported a solid set of half-year results and said consumer confidence was gradually returning.

Stripping out the effects of the demerger, which distorted the pre-tax figures, underlying profits rose by 3 per cent to pounds 79.4m in the six months to February.

Though like-for-like sales were down by 2 per cent on the year before and are down by a similar figure in current trading, the company said its margin figures were more encouraging.

Part of Debenhams' success is that it has avoided the worst discounting on the high street. It has improved its gross margin by 0.2 percentage points and has reaped the benefits of a gradual concentration of its supply base from 3,000 suppliers four years ago to 650 now.

The company has also successfully integrated popular own-brands, such as Maine New England and Trader, with exclusive ranges from designer houses such as Ozwald Boeteng.

Debenhams admits it must have benefited from the woes at Marks & Spencer and says it has increased its market share in both menswear and womenswear.

Going forward, Debenhams is planning to open 15 new stores over the next four years, to take its chain to more than 100 outlets.

The current weakness with Debenhams is that it is finding it difficult to drive sales forward significantly. But the keen cost control and margin improvement should keep earnings momentum going.

The home shopping joint-venture with Freemans also looks promising. Two more catalogues should be produced later this year, with the first 600- page Debenhams Direct catalogue due next year.

One potential cloud on Debenhams' horizon is the M&S factor. With the wounded giant of Baker Street getting tougher on prices, this is likely to have a knock-on effect on rivals such as Debenhams and Storehouse, the Bhs group.

Investors have seen a strong rally in the stock over the last six months from a low of 272p last autumn. Yesterday Debenhams shares closed 3p lower at 465.5p.

On SG Securities' full-year forecast of pounds 140m this puts them on a forward multiple of almost 19, a discount to rivals such as Next and M&S.

This is a solid, well-managed business but the shares look up with events for now.