Department store group Debenhams brushed aside fears that it is losing out to a resurgent Marks & Spencer (M&S) today as it reported a 5% jump in profits.
Chief executive Belinda Earl said “there is room for both of us” on the high street and spelt out aggressive expansion plans.
The group wants to attract 5m new customers over the next five years by opening dozens of new stores in the UK and overseas.
Two more have been added to the pipeline, in Workington and Cork, which will take Debenhams’ store base in the UK and Ireland to 111 by 2006.
Pretax profits rose to £153.6m in the 12 months to 31 August, up from £146.1m a year ago and in line with City expectations.
These were revised in July after Debenhams revealed it had been forced to discount summer clothing ranges due to rainy weather.
But today the group said it had managed to protect margins by controlling costs and taking out 200 jobs in its head office in recent months.
Sales have also continued to climb with total sales up 6.4% in the last seven weeks and like-for-like growth of 4.6%.
Total sales in the 12 months to the end of August were up 5% at £1.69bn with like-for-like sales ahead by 4.8%.
Earl said: “Customer confidence has been growing in the last few weeks and our performance this half has been on a rising trend.”
Shares in the group, which have fallen 37% since the start of the year, were up by over 12% in early trading in the City today.
Analysts said investors were reassured by the group’s performance given the gloom created by its trading statement in July.
Rowan Morgan, analyst at Peel Hunt, said current trading was “positive” and he expected the group to post profits of £170m in 2002-2003.
Debenhams’ total dividend payout of 12.7p per share, up from 11.7p per share a year ago, was also ahead of analyst forecasts.
Marks & Spencer has experienced a dramatic recovery this year under chairman Luc Vandevelde as others in the clothing sector struggle.
Earlier this month the retail giant said its like-for-like growth was running at 10% as shoppers snapped up new ranges.
But Ms Earl said Debenhams’ market share remained steady and despite some overlap with M&S it held a different appeal.
“Whilst we are competing on the same high street we are also giving our customers something different. There is room for both of us,” she said.
A new womenswear director has been brought in since the summer and a new range “Spirit at Debenhams” launched, endorsed by TV star Tamzin Outhwaite.
The group added that its Designers at Debenhams collection was performing well and Jasper Conran would be launching a new menswear range in the spring.
Debenhams has revived its fortunes in recent years by focusing on value-for-money own-label brands and bringing in top international names.
But Earl added that health and beauty was now one of the group’s strongest areas of growth, accounting for 11.5% of total turnover.
The launch of the Nectar loyalty card, run in conjunction with Sainsbury’s, Barclaycard and BP, had also increased footfall in the stores.
New franchise outlets have opened in Stockholm, Jeddah and Sharjah in recent months and the group also intends to expand into Malaysia and Denmark.
It wants to have 150 stores in the UK within the next 10 years and will open in Redditch, East Kilbride and Inverness in the coming months.
EGi News 22/10/02
