Debenhams' share price opened lower this morning, after the retailer revealed a 20.6 per cent fall in pre-tax profit for the last year.
Over the 12 months to August 30, the department store chain saw underlying pre-tax profit drop to £110.3m, in line with expectations, while reported pre-tax profit fell 23.9 per cent to £105.8m.
Group like-for-likes rose one per cent, but gross margins fell 0.6 per cent over the year, although margins began to recover during the second half, rising 0.1 per cent.
Gross transaction value was up 1.7 per cent to £2.82bn and net debt has improved by just over £10m to £361.5m.
Earnings per share fell 19.6 per cent to 7.4p.
On the back of this news, Debenhams' share price fell 0.7 per cent in early trading.
Management of the department store, which has been struggling for a few years and has become notorious as a serial discounter, said “good progress” had been made in its strategic progress, a major part of which is addressing the extent to which it goes on promotion.
Debenhams noted that as a result of this, it had seen a 10.6 per cent increase in full price sell through of its own brand. More conservative sales targets and tighter buying levels – both of which had also presented problems in the past – had led to a 5.3 per cent reduction in like-for-like closing stock.
It also highlighted “encouraging early signs” from trials of new concessions including Sports Direct (which owns 11 per cent of Debenhams), Costa, Monsoon and Mothercare.
Chief executive Michael Sharp said:
After the challenges we faced in the first half, everyone in the business has been focused on addressing the issues we identified and on delivering on the priorities we set out in April to deliver long-term sustainable growth. Our performance in the second half reflects this with operating profit up on the previous year.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. We expect further benefits to accrue from these priorities going forward.
However, Sharp said he was still cautious about future trading because consumers were yet to see any benefit from the economic improvements trickle through to their purses, saying the team would therefore “plan prudently”.
He added: “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."