Debenhams posts resilient half-year profits figures

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The Independent Online

Debenhams moved closer to reinstating its dividend yesterday after it posted a resilient set of half-year sales and profits, despite the dire weather before Christmas and lower footfall on the high street since early January.

The department store chain said in October it would consider restoring its dividend if its trading results remained "satisfactory", which was how Michael Sharp, the deputy chief executive of the department store, described its performance for the half year to 26 February. While its board will make the final decision in April, the City expects the dividend to be reinstated. Its last payout to shareholders was in October 2008.

Tom Gadsby, an analyst at Matrix, said: "We expect the company to return to the dividend list at the half year." He forecast a full-year dividend of 3.6p.

Over the half year, underlying sales fell by 1.5 per cent, excluding VAT, although this figure would have been higher without the snowfall before Christmas. However, Debenhams was buoyed by barnstorming online sales, which rocketed up 82 per cent over the period. Furthermore, Debenhams said it had grown gross margin, boosted by its significant shift to own-label brands and its terminal, or unsold, stock being at an all-time low in stores.

As a result of these developments, Debenhams said it expected "headline profit before tax for the first half of the year to be ahead of last year and in line with market consensus". Mr Sharp said Debenhams had delivered profit growth for the last three and a half years.

Nick Bubb, a retail analyst at Arden Partners, has forecast full-year profits of £158m for Debenhams, but described flat recent sales performance as "unimpressive when compared with the much stronger figures reported by rivals House of Fraser and John Lewis".

While Mr Bubb said there had been a slight downward shift in trade over the past seven weeks, it "could have been worse and the last week of the period was boosted by a good school half-term".

Following an upbeat start to trading in early January boosted by intense discounting and a surge in pre-VAT spending, retailers such as Primark and John Lewis have reported more subdued consumer spending on the high street since then.

Mr Sharp described Debenhams' trading in January as "strong" and added that February, which is typically one of the quietest months for all chains, had been in line with expectations. On the outlook, he said that consumers continue to face a range of pressures on household budgets, as well as fears over house prices and rising unemployment. However, it will continue to focus on "self-help levers", such as own-bought products, multi-channel and refitting its stores.

Royal boon?

Retailers are expected to enjoy a huge sales boost from the royal wedding in April, although leading chains will adopt different opening times. UK chains will get a boost of £527m from the marriage of Prince William to Kate Middleton, according to research by the Centre for Economics and Business Research on behalf of Kelkoo.

The Government's decision to declare 29 April a bank holiday will account for more than a fifth of the increased spend at £110m, as people use the day to go shopping. However, the high street giants, John Lewis and Marks & Spencer, will both open at 1pm to allow staff to enjoy the wedding. Debenhams yesterday said it would open its stores at the normal time on the bank holiday Friday. Michael Sharp, at Debenhams, said: "There will be a number of customers who will want to get on with things and won't want to watch the royal wedding."