Stores weather storm to post increased profits

MORE retailers will be under the spotlight next week when JD Sports Fashion, stationery chain WH Smith and department store Debenhams update the market.

MORE retailers will be under the spotlight next week when JD Sports Fashion, stationery chain WH Smith and department store Debenhams update the market.

Retailer JD Sports Fashion is expected to announce a 17% increase in profits as it shrugs off the gloom surrounding the high street on Wednesday.

Sales at JD, which operates 350 JD Sports and Size? outlets in the UK, have grown rapidly over the past year as its ranges of fashion and sportswear have proved popular with customers despite the squeeze in consumer spending.

Its growth has also been fuelled by a series of recent acquisitions and through stealing market share from its ailing rival JJB Sports, which has been forced to push through a rescue deal with creditors in a battle for survival.

The snow over the key Christmas trading period played havoc with many retailers but could not halt JD’s momentum. In the latest of a series of bullish trading updates, it reported that same-store sales were up 2.5% in the last five weeks of 2010.

The Bury-based retailer also said its pre-tax profits for the year to January 31 would exceed the City’s expectations of £75m.

Analysts now forecast that pre-tax profits will rise to about £79m in the year.

But the market will be on the look-out for any hint that JD has in recent weeks been hit by the slowdown in consumer confidence that has depressed many retailers in 2011.

Department store chain Debenhams is set to report an increase in profits when it unveils first-half results on Thursday, as its policy of selling more own-label ranges pays off. The group, which has 167 stores in the UK, Ireland and Denmark, recently said it expects to meet the City’s profit forecasts for a 4% rise in profits to £128m for the six months to February 26.

This is despite same-store sales having declined 1.5% in the period following the increase in VAT to 20% in January and the disruption caused by the snow in December, which wiped as much as £30m from its sales.

Debenhams’ strategy to deal with the tough conditions on the high street involves sourcing more own label ranges to boost its margins.

This has also helped it combat rising costs, including cotton which doubled in price over the past year. It recently launched a nationwide campaign advertising its ranges of clothes and accessories from designers including Jasper Conran, Jonathan Saunders and Jonathan Kelsey.

Meanwhile, it has chased business by holding attention-grabbing sales, such as its current offer of up to 70% off products in various departments.

But while Debenhams’ profits may please investors, its sales figures have been less satisfying, after they deteriorated in the final weeks of the first-half.

Stationer and confectionery chain WH Smith is set to reveal another uplift in profits on Thursday despite declining sales.

The chain, which owns 573 high street stores and 516 outlets in travel hubs such as airports and train stations, said same-store sales dropped 7% in the eight weeks to January 22 as a result of difficult trading conditions.

At railway stations, airports and other travel sites, the company reported a 3% decline in the 21 weeks to the same date.

Matters were made worse by December’s snow, particularly at its travel business, which suffered as flights and trains were cancelled.

Chief executive Kate Swann described the performance of both divisions as resilient and said the company remained on track to meet expectations.

Analysts had expected a fall of 5% in the high street division and 1% in the travel stores, but this prediction was made before the snowfall.

But while WH Smith, like many retailers, is expected to reveal that trading has remained tough in subsequent weeks, its profits are likely to have grown as a result of a plan to sell more high margin goods

The company has moved away from lower-margin entertainment items such as CDs and DVDs and concentrates more on selling its core range of confectionery and stationery.

 
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