23rd Oct 2014 07:28
(An item published at 0759 BST misstated the final dividend. The correct version follows.)
LONDON (Alliance News) - Department store operator Debenhams PLC Thursday reported a lower pretax profit for its last financial year, but said the efforts it is taking to turn the business round are paying off as operating profit rose in the second half of the year.
Debenhams has suffered for the past few years, hit by tough competition on the UK high street and from online competitors. In the first half of the year, it admitted it had been hard hit by the heavy discounting it had to do to pull shoppers into its stores, and Chief Executive Michael Sharp pledged to do fewer, smaller promotional sales and focus on big events such as its Blue Cross sales.
"We achieved higher full price sales and fewer days on promotion as a result of greater clarity on our promotional calendar resulting in an improved gross margin. We have also made good progress on our work to drive better returns from our space. Developing a more convenient and competitive online fulfilment offer has been a key priority and we enter this year's peak trading period with a much improved range of delivery options," Sharp said in a statement Thursday.
Debenhams reported a pretax profit of GBP105.8 million for the 52 weeks to August 30, down from GBP139.0 million a year earlier, as higher sales and distribution costs as wella s administrative expenses offset a revenue rise to GBP2.31 billion, from GBP2.28 billion. Its operating profit for the year fell to GBP128.6 million, from GBP155.4 million.
However, its operating profit in the second half of the year was up 2.9% on the same period a year earlier, compared with the 22.9% decline it reported in the first half of the year, showing the impact of its turnaround plan, the CEO said. Its gross margin was down 100 basis points in the first half, but was up 10 basis points in the second half.
It said the refocusing of its promotional strategy had resulted in a 10.6% increase in own brand full price sell-through in the second half. It is also encouraged by the early signs of its efforts to opimise space in its stores by through concessions with the likes of Sports Direct, Costa Coffee, Monsoon and Mothercare.
It also said its more conservative sales targets and tighter buying levels resulted in 5.3% reduction in like-for-like closing stock, another issue it reported previously.
Debenhams also said it is making progress with improving its online offering and distribution. Online sales rose 17.6% during the year, representing 15.3% of group sales, while online earnings before, interest, tax, depreciation and amortisation increased 20.5%.
It said its new online delivery options are now fully available, including next day click & collect and a 10pm cut-off for next day delivery to home.
Overall, Debenhams' like-for-like sales rose 1.0% in the financial year as a whole, with gross transaction value up 1.7% to GBP2.82 billion.
It maintained its full year dividend of 3.4 pence, after saying it will pay a final dividend of 2.4 pence.
However, the company also remains cautious about its outlook.
"Customers tell us that although they are encouraged by economic improvements this has yet to translate into higher disposable income and the market remains tough. We therefore remain cautious about the outlook and will continue to plan prudently," CEO Sharp said.
"Whilst this has been a challenging year for Debenhams, the brand is strong and our improved second half performance gives us confidence that we are ready for the key Christmas period and can deliver sustainable growth over the longer term," he added.
By Steve McGrath; [email protected]; @stevemcgrath1
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