16th Apr 2015 14:58
(An item published at 1420 BST misstated the timeline for the share price high. The correct version follows.)
LONDON (Alliance News) - Debenhams PLC Thursday reported a rise in profit for the first half of its financial year, as sales grew following a revamp of its promotional strategy and service improvements that drove higher sales of orders made online and collected in stores.
The department store operator said pretax profit grew to GBP88.9 million in the 26 weeks to February 28, up 4.3% from GBP85.2 million a year earlier, as revenue grew to GBP1.33 billion from GBP1.30 billion. Like-for-like sales were up 1.3%, it said.
The department store operator was criticised for being one of the biggest discounters in the run up to Christmas 2013, a move that many competitors were forced to follow with a subsequent hit on margins. However, it had already said it was less reliant on discounting in the run-up to Christmas 2014, although its margin growth was capped as it sold more low-margin products like cosmetics. This time round, it discounted heavily in 'Black Friday' week, but had 10 fewer days on promotion in the four weeks to January 10 as it didn't start its sales before Boxing Day.
The company said Thursday that its refocused promotional strategy resulted in a 9% increase in own brand full price sales in the 26 weeks to February 28, with tightly controlled stock and more flexible purchasing. Service improvements also drove click & collect growth of 22.1%, with next day services accounting for 49% of orders in the seven days prior to Christmas.
Online sales were up 12.7% and international sales grew 1.5%, it said.
Gross transaction value for the UK segment increased by 2.5% to GBP1.3 million and revenue grew by 1.7% to GBP1.1 million as a result of its strong Christmas performance, and as it moved its 'New Season Spectacular' promotion forward one week into the first half to coincide with the pay day at the end of February. It also opened two new stores in the second half of 2014 followed by a further two in the first half of 2015.
Cantor Fitzgerald said Debenhams' results were in line with its expectations, but were flattered by the New Season sale being brought forward, adding GBP3 million to operating profit.
However, Debenhams said this uplift was in part diluted by the difficult season for clothing across the sector in the autumn, when unseasonal warm weather kept shoppers out of stores full of the autumn/winter collections.
The company said its gross margin remained flat as weaker womenswear sales in the autumn season, an ongoing impact on sales mix from growing sales in the lower margin cosmetics category, and investment in reducing prices offset a 100 basis points benefit from reduced overall markdowns.
"While management is pleased with its progress towards its strategic priorities, we believe these results confirm our view that any gross margin benefit from lower marksdowns/promotions will need to be reinvested into the offer," said Investec analyst Kate Calvert, who added the results were in line with Investec's estimates.
The company said it will maintain its interim dividend of 1 pence per share.
"Looking forward, our customers tell us they are feeling a little more optimistic about the economic outlook, but they remain cautious. Accordingly we are continuing to plan prudently in the near term, while remaining focused on our strategic priorities, and are continuing to invest to ensure that our business is well-positioned to drive sustainable growth in the longer term," Chief Executive Michael Sharp said in a statement.
Shares in Debenhams were trading up 5.5% at 84.01 pence Thursday afternoon, making it the best-performing stock in the FTSE 250 on the day and marking the highest level for the stock since mid-January 2014.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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