Debenhams Sees Full-Year Profits Rise

on Oct 25, 2012

On 25 October 2012, the UK department store chain Debenhams (LON:DEB) reported a rise in full-year profits despite the “challenging trading conditions” observed in 2012, which have been troubling many UK retailers such as Burberry (LON:BRBY). Although Debenhams stated that it did not anticipate any significant changes in the economic environment, the company raised its targets for international and online growth, as reported by Reuters.

**Debenhams Reports 4.2 Percent Rise in Pre-Tax Profit**
In its press release, Debenhams, which operates about 170 stores in the UK, Ireland and Denmark, and over 60 international franchise stores, announced that for the year ended September 1, its profit before tax went up by 4.2 percent to £158.3 million. Reuters reports that the figures were slightly ahead of analyst expectations for £157.5 million. In addition, the company also reported a 2.6 percent rise in total sales and a 2.3 percent increase in like-for-like sales including VAT. Online sales went up 39.8 percent.

!m[Britain’s Second-Largest Department Store Group Bucks Trend](/uploads/story/638/thumbs/pic1_inline.png)“Achieving strong sales and profits despite a very difficult market is testament to the success of our great value and stylish products,” commented Debenhams’ CEO Michael Sharp in the company press release. “I’m delighted with these results.”

Following the announcement, Debenhams’ share price jumped 4.13 percent at 8 a.m. in London when the markets opened.
**The Retailer Achieves Market Share Gains**
Reuters reports that while many other retailers have been suffering from the government’s austerity measures and from wage growth not keeping up with inflation, Debenhams has managed to buck the overall negative trend by expanding its range of products and increasing its market share. In September, the Financial Times quoted Mr Sharp as saying that the company saw no signs of a slowdown, adding that the Olympics “really didn’t have a drag on us at all.”

Debenhams increased its market share in womenswear and either grew or maintained share in all other areas. Debenhams reports that new designers, stronger marketing as well as successful expansion overseas have contributed to the company’s market share gains. As noted in the press release, seven new franchised stores expanded Debenhams into countries including Russia and Pakistan, bringing the total number of overseas stores up to 70.

**Debenhams to Continue with Expansion**
In its press release, Debenhams also announced plans for further expansion, both in the UK and abroad. The company intends to build 17 new stores across the UK over the next five years, creating some 1,700 jobs. In terms of international expansion, over the next four years Debenhams plans opening 20 stores in several overseas locations including Bulgaria, Estonia, Egypt and Turkey.
“We have made good progress in 2012, achieving higher sales and earnings growth despite a very difficult market,” noted Mr Sharp. “I believe the strong sales momentum we achieved in the second half of 2012 is clear evidence that our strategy to build a leading international, multi‐channel brand is working and this has prompted us to be more ambitious with our medium‐term targets for the growth of our online and international operations.”