Online surge helps Debenhams to Christmas record - but markets still disappointed

Debenhams hailed its best ever December performance today after ramping up pre-Christmas discounting (Dave Thompson/PA Wire)

Debenhams has become the latest of the big department store chains to post record Christmas sales, boosted by a surge in online revenues.

However shares in the company tumbled today after it admitted profit margins had been dented by more promotional activity in the run-up to Christmas and higher distribution costs due to strong internet sales.

The High Street stalwart delivered a 5 per cent leap in sales at stores open more than a year over the five weeks to January 5, helped by barnstorming demand for clothing featured in its first Christmas TV advertising campaign for six years.

The figures from Debenhams closely mirrored the strong trading from rivals House of Fraser and John Lewis, although the latter was the best performer with like-for-like sales up 13 per cent over Christmas.

The trio have benefited in recent years from being one-stop shops and booming online sales, including consumers picking up products ordered on the web in stores.

Michael Sharp, chief executive of Debenhams, said: “The department store model is clearly a winner in the multi-channel world because of the breadth of choice and ways to shop, as well as lots of products under one roof.”

While Debenhams grew like-for-like sales by 2.9 per cent over the 18 weeks to January, online revenues rocketed by 39 per cent.

Reflecting this, the British Retail Consortium today said that online sales boomed by 17.8 per cent last month – the highest growth for a year – but underlying sales for the High Street grew by an anaemic 0.3%. Debenhams said that its TV advertising delivered a stunning uplift in sales from its exclusive designers, including Julien Macdonald, Jenny Packham and Jonathan Saunders.

A women’s red coat from Saunders enjoyed a 400 per cent uplift on the day the commercials first aired to become Debenhams “best-ever selling coat”, said Sharp.

But the retailer said that discounting levels on the High Street were higher than 2011, which forced Debenhams to be more promotional for two days over the 18 weeks.

As a result, Debenhams expects its gross margins to be up by just 0.1 per cent, instead of 0.2 per cent. The shares fell by 5.5 per cent, or 6.5p, to 110.6p today.

Investec has provisionally downgraded the retailer’s pre-tax profit forecasts by as much as 6 per cent to £159 million for the year to August.

Debenhams announced today that Sharp had bought nearly £110,000 worth of shares in the company.

Evening Standard