Debenhams adds to high street optimism
Friday 24 April 2009
Debenhams has joined the growing group of retailers beginning to defy the recession, revealing yesterday that its sales are growing for the first time in a year and a half. Shares in the department store group soared as it unveiled pre-tax profits well ahead of City forecasts.
Michael Sharp, Debenhams' deputy chief executive, said consumers were spending once again as they benefitted from falling utility bills and mortgage costs. "There is more disposable income around than there was this time last year if you take into account the energy bills and interest rates."
Rival retailers will be particularly pleased that Debenhams seems to be performing well across many of its ranges. The department store chain, which has 154 stores in the UK, said total sales grew by 6.1 per cent, with like-for-like sales up by 1.9 per cent, over the seven weeks to 18 April, boosted by accelerated sales of its Designers at Debenhams ranges and other own-bought ranges, such as Maine New England.
For the 26 weeks to the end of February, Debenhams grew its headline pre-tax profits by 10.7 per cent to £104.2m – about £10m higher than market consensus forecasts. Total sales rose by 0.3 per cent to £1.3bn over the trading period.
The star performers were the retailer's Designers at Debenhams ranges, including John Rocha and Jasper Conran, where overall sales were up by 11 per cent.
Mr Sharp said the performance was particularly pleasing, given that the "trading period up to Christmas was one of the most volatile we have ever seen".
However, like other retailers that have reported stronger trading conditions in recent weeks – including Primark and Burberry – Mr Sharp remained cautious about the rest of its financial year, and said he did not feel ready to call the bottom of the consumer downturn.
Mr Sharp also declined to comment on speculation that Debenhams is planning a rights issue or another form of capital raising to pay down its debts. But its net debt at the end of February was £927.2m, £66.2m lower than at the end of its financial year last August.
Debenhams is committed to opening nine stores over the next two years, which will create 1,800 jobs.
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