Debenhams welcomes onset of cold weather to push sales

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Rob Templeman, the chief executive of Debenhams, scotched speculation that the colour grey was behind a dismal start to the winter season, instead blaming the lack of a cold snap for a slump in sales since September.

The department store group, which was refloated in May after two-and-a-half years in private hands, said like-for-like sales fell 4.2 per cent in the past seven weeks. It is the first retailer to disclose what impact the warm autumn is having on its sales.

"Have you worn a winter coat yet?" Mr Templeman said. "Anything cold-weather related isn't selling so the only conclusion we can come to is that it's weather related."

He said grey - a hot colour for this season - was the group's fourth best-selling colour. "You have to wear it with another colour," he added, implying that otherwise it would have sold even better. (The top three are black, red and brown.)

In a blow for fashion fiends, he warned that the era of falling clothing prices was over because of the sharp rise in costs that retailers were facing. "You will see more inflation coming through," he said.

The stockmarket shrugged off the group's weak start to its financial year, which came after it beat analysts' profits forecasts for the 12 months to 2 September. Shares in the group rose 5 per cent to 187.75p but remain down on their 195p-issue price.

Although a complicated balance sheet made its profit figures hard to interpret (after allowing for various accounting, rental and interest adjustments), analysts alighted on the £171m of underlying profits before tax that it reported, which was £6m more than expected.

"They [the results] were bloody brilliant," Mr Templeman said.

Debenhams is counting on an ambitious store expansion plan, in the UK and overseas via franchises, to power its growth in the coming years. It is axing suppliers and sourcing more of its own clothing ranges to boost its margins, which it expects to improve during the year.

The group, which trades from 132 sites in the UK and Ireland, opened its first out-of-town department store in Llandudno but will wait to see how it performs before switching tack to focus on retail parks instead of high streets.

It has signed 26 contracts for new stores from now until 2011, which increase its trading space by 17.5 per cent to 11.8 million sq ft.

Its smaller, women-only stores are proving popular since the first one was opened last year. It has five "Desire at Debenhams" outlets so far, and sees scope for up to 100 eventually.

The group will be relaunching its website next month, and said it saw opportunities to sell more cosmetics and electrical goods online.

Not all analysts were convinced by the group's optimistic tone. "The suspicion will remain that Debenhams has had its best years under private equity. These numbers will not persuade investors who failed to buy the bull argument at the float to buy the shares," Philip Dorgan, at Panmure Gordon, said.