Debenhams brand fuels profit surge

DEBENHAMS said yesterday that sales of its own brand ranges had helped it to increase its profit by 20 per cent.
The rise in the year to 28 August came as the company also reduced its debt.

Sales of Debenhams own brand ranges, which include H! by Henry Holland and Principles by Ben De Lisi, grew 15.4 per cent on the previous year to £497.7m.

The pre-tax profit rise to £151m also heralds the resumption of dividend payments in 2011, the company said.
Chief executive Rob Templeman said: “In spite of the uncertain outlook, there is much to be positive about our business which will enable us to make further progress over the next year.”

The group, which has 167 stores across the UK, Ireland and Denmark, said its net debt was £516.8m, down £73.5m on the year earlier period.

The retailer said it had managed to offset the rising cost of materials like cotton by effective sourcing.

Sales at stores open at least a year were flat compared with the previous 12-month period, while gross profit margins were up 70 basis points as the firm moved over 530,000 square feet of trading space from concessions to own bought products.

Templeman added: “Although we remain concerned about the general retail environment, we are encouraged by the start to the new financial year which has seen positive like-for-like sales and gross margin in the early weeks.”

Debenhams said its product strategy had led to an increase in market share in clothing, footwear and accessories by 0.2 per cent.

The strongest performance was in menswear and childrenswear, the company said.

The group said it continued to expand its in-house range, with new menswear and homeware lines released towards the end of the year.

As part of its strategy to put margins ahead of sales, set out 18 months ago, Debenhams has also completed a series of store refits and openings, as well as developed its website.

The group opened six new stores in the financial year, and completed refits in Manchester, Glasgow and Swindon.

It is now refitting five stores, with a further five scheduled for next year.

Analyst Kat Calvert of Seymour Pierce said: “The balance sheet is no longer an issue.”

Calvert added: “Increasing confidence in the sustainability of Debenhams’ growth story should start to close the valuation gap on its peers.”

Debenhams also announced yesterday that its is launching a new clothing line called Edition next spring.

Designers Jonathan Saunders, Preen and Jonathan Kelsey, will be the first to take part in the new project, which is aimed at using young talent to create original ranges.