25th Jun 2015 09:21
LONDON (Alliance News) - Debenhams PLC Thursday said that group like-for-like sales in the 15 weeks to June 13 were flat, but said it is on track to meet full-year market expectations as it continues to refocus its promotional strategy and trial concessions within its department stores.
The FTSE 250-listed department store operator said that while like-for-like sales were flat in the 15-week period, they were up 0.9% in the 41 weeks to June 13. The New Season Spectacular sale was brought forward into the first half of the year, which together with other promotional changes, diluted like-for-like sales by around 1%, it said.
Debenhams has been refocusing its promotional strategy in order to increase full-price sales and run less promotions and discounts. It has already reduced the number of days running sales, with three days less on promotion year-on-year in the 15-week period, and the next phase is to look at putting less stock into a promotion as well as having a greater variety of discounts as opposed to one standard discount across all items, Chief Executive Michael Sharp told journalists Thursday.
Debenhams has been tightly controlling its stock and said it is on track to deliver a 5% reduction in stock for the full year.
Online sales, meanwhile, demonstrated revenue growth of 16.7% in the 15 weeks helped by a more competitive service offer and improvements to the online presentation. Group gross transaction value was up 0.4%, and international sales in its Danish subsidiary Magasin du Nord continued to deliver good growth helped by a recovering Danish economy, Debenhams said.
Debenhams added that its gross margin guidance for the full year remains unchanged at the bottom range of growth of between 10 and 40 basis points, and that it is on track to achieve full-year profit market expectations of GBP111 million.
As part of its 'space optimisation programme' to fill more than 50% of an identified one million square feet by April 2016, Debenhams has started trialling concessions within its stores. Concession stores include fashion retailer Monsoon, Sports Direct, BHS Lighting, Patisserie Valerie and Chi Kitchen, an exclusive-to-Debenhams pan-Asian cuisine offer from the owners of Thai restaurant Mango Tree.
"We have made good progress on our strategic priorities, and remain on track to deliver results in line with market expectations. During this period we have continued to focus our promotional activity around the events Debenhams is famous for; we have made further improvements to our multi-channel proposition, including more competitive delivery charges; we have commenced further space trials with a number of exciting new partnerships; and have seen continued progress in our international operations, with another strong performance from Magasin," Sharp said in a statement.
"Our customers tell us that, whilst they recognise the improving economic background, they remain cautious in their spending. Our wide product choice, clear destination departments, and improving service proposition gives us a strong platform from which to deliver long-term sustainable growth," he added.
Cantor Fitzgerald forecasts for Debenhams like-for-like sales growth for the full year of 1% and a pretax profit of GBP112 million.
But Cantor analyst Freddie George said that there is a increasing cost to the business as it grows its online operations and therefore "limited scope for the company to accelerate dividend growth".
Meanwhile, RBC Capital Markets commented: "Debenhams suffered from a multitude of self-inflicted and external issues last year, but we think it is taking some of the right steps to address these, including improving its service offer and keeping tighter control of inventory. However, we expect only a fairly gradual recovery."
Shares in Debenhams were trading up 0.7% at 90.90 pence Thursday morning.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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