Summer sales push up profits at Debenhams

DEPARTMENT store Debenhams has forecast higher-than-expected profits after a summer of discounts and promotions helped boost its market share.

DEPARTMENT store Debenhams has forecast higher-than-expected profits after a summer of discounts and promotions helped boost its market share.

The group, which has 169 stores in the UK, Ireland and Denmark, reported top-line growth of 0.4% on a like-for-like basis in the nine weeks to August 27, compared with a fall of 0.4% over the previous 43 weeks

During the period, Debenhams started its summer sale five days early to steal a march on competitors, helping it enter the autumn season with low stock levels.

The group said gross margin for the full year may be slightly down as a result of the discounting and competitive pricing, but the additional sales generated will help push profits for the year above City expectations of a 5% increase to £158m.

The strategy helped the chain boost its market share of clothing and premium health and beauty.

The group did not provide sales figures for the UK business, but said its Magasin du Nord chain in Denmark saw sales growth of 4.8%, indicating that the UK performance may have been weaker.

Chief executive Michael Sharp, who stepped up from the deputy’s position three weeks ago, said the group had also kept its prices competitive while also running special offers and sales.

He said: “It’s not just about starting the sale early. Customers are liking what we are doing and our Designers at Debenhams ranges. There will be winners and losers and we think we are well positioned to be one of the winners.”

Its “Spectacular” promotions, where it drops prices by up to 25% across the store, have also proved increasingly popular in recent months, he added.

The company’s profits have been boosted in recent years by its focus on selling its own label and Designers at Debenhams ranges.

Debenhams has put up prices by an average of 5% in its current autumn range in response to high commodity prices, particularly cotton. But it said it would put up prices by less next year after commodity price inflation began to ease.

The chain plans to accelerate its store refit programme, with six stores due to be completed in the coming weeks ahead of plans for another 20 next year.

 

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