24th Oct 2013 08:01
LONDON (Alliance News) - Debenhams PLC Thursday said that it remains confident in its outlook for 2014, but remains cautious about the pace of any UK consumer recovery and a highly competitive marketplace.
The group reported a fall in full-year profits, as a stronger sales performance in the second half of the year failed to offset difficult trading in the first half.
The department-store chain reported a pretax profit of GBP154.0 million for the 53 weeks to August 31, down 2.7% from GBP158.3 million a year before, and said that its group gross margin was flat when compared with the prior year.
Debenhams said that a good recovery in the second half of the year, due to a combination of better margin and product mix, more than offset a 20-basis-point decline in the first half, caused by increased promotional activity and the impact of bad weather in the UK.
It reported an increase in net profit to GBP127.9 million, compared with GBP125.3 million, due to a lower tax bill compared to last year.
It said its group operating profit declined by 4% to GBP168.0 million, due to a fall in UK operating profit, as well as a decline in its international operating profit following the write-off of GBP3.8 million resulting from the closure of its franchise stores in Romania.
"More widely, whilst consumer confidence may be showing signs of improvement, we expect that household incomes will remain under pressure from inflation growing ahead of wages. With this in mind, we remain cautious about the strength and pace of any consumer recovery in 2014 and expect the marketplace to remain highly competitive," said Chief Executive Michael Sharp in a statement.
The board declared a full year dividend of 3.4 pence per share, a 3.0% increase.
Debenhams reported revenues for the full year of GBP2.28 billion, compared with 2.23 billion a year earlier, boosted by a 2.5% increase in gross transaction value to GBP2.78 billion. It said that the gross transaction value rose by 3.7% internationally and by 2.3% in the UK. The group said that like-for-like sales were up 2%.
Debenhams's Danish department store, Magasin du Nord, delivered another good sales performance with like-for-like sales up 6.0% in sterling terms. However, it said that the Republic of Ireland remains a challenging market.
The retailer said that online sales rose 46%, representing 13% of group sales for the year.
Michael Sharp told journalists in a conference call that he sees online sales across the group increasing to GBP600 million over the next three to five years, with GBP100 million coming from internationally and GBP500 million from the UK.
Sharp said that the transformation of its Oxford Street store to turn it into an international flagship store is on budget and on time to launch in late November or early December in time for Christmas trading. He said that a total capital expenditure of GBP25 million was spent on revamping the store.
Sharp said he sees price promotions as a strength for Debenhams and said the group will gauge market conditions when considering discounting during the Christmas trading period.
Since the year end, Debenhams has opened three new franchise stores, including two in new markets, bringing the total to 238 stores in 29 countries.
Sharp said that the group has a franchise pipeline of 27 stores in the next few years, with a target of 150 stores.
Shares in the retailer were down 2.0% Thursday morning, trading at 108.50 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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