13th Jan 2015 07:40
LONDON (Alliance News) - Debenhams PLC Tuesday reported good sales growth for the key Christmas trading period, and crucially said it had been less reliant on discounting to pull shoppers into its stores, although it warned that margin growth had been capped as sales of low-margin products were particularly strong.
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.
In its trading statement Tuesday, the company said like-for-like sales in the four weeks to January 10 rose 4.9% on the year, driven particularly by online sales which grew 28.9%. It said sales in 'Black Friday' week rose 10.3% thanks partly to its promotional event and online orders on Black Friday itself were up 125%. However, for the four weeks as a whole, it had 10 fewer days on promotion and it reported a 12.1% increase in own bought full-price sell-through.
Despite this, the company warned that gross margins will come in towards the lower end of its guidance for an increase of between 10 and 40 basis points, because sales of low-margin products like beauty products and sales of concession brands were strong and clothing sales were challenging.
It added that it had also kept a tight control on costs, and hence cost growth will be towards the lower end of its guidance for between a 2% to 4% increase.
Debenhams performed less well in the 19 weeks to January 10, as, like peers, it said clothing sales were hit by the warm autumn weather. Like-for-like sakes actually declined 0.8%, while online sales were up 6.0%. Gross transaction value rose a modest 0.2%, compared with 5.9% in the last four weeks of the period.
"Our performance for the 19 weeks to 10 January reflects the well-documented challenges in the clothing market and our strategy to be less promotional as part of our ongoing focus to increase the percentage of full price sales. Fewer promotions inevitably led to a slowing in the rate of sales growth online given that it is an inherently more promotional channel," Debenhams said in its statement.
However, Chief Executive Michael Sharp was more pleased with the company's performance over Christmas.
"I am pleased with our performance in the critical Christmas trading weeks, driven by our strength in a diverse range of product categories and a strong marketing campaign focussed on gifting. Our performance steadily improved following the well documented challenges in the clothing market in the autumn," he said.
By Steve McGrath; [email protected]; @stevemcgrath1
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