The second largest department store chain in the UK, Debenhams released its trading update for the first half ended 28th February 2008. Gross transaction value for the 26 was 0.3% higher than the prior year despite challenging trading conditions across the retail sector. Excluding VAT, like-for-like sales for the period were 3.6% lower than last year.
Own bought ranges and particularly Designers at Debenhams ranges have delivered good sales growth and further progress has been made in the company’s strategy to increase its bought participation. The strength of Debenhams bought sales has contributed to a positive movement in gross margin and the department store expects gross margin for the first half to be higher than last year.
The combined impact of higher gross transaction value and gross margin with the continuing tight management of costs and stocks alongside management’s focus on the levers that drive cash margin will result in first half profit before tax and EBITDA being ahead of the previous year.
A strong focus on stock management has also resulted in terminal stocks being at a historically low level at the end of the first half. Since the end of the first half, Debenhams has taken the opportunity to acquire a quantity of stock and fixtures and fittings from the administrators of Principles as well as a licence to trade the brand. This will ensure continuity of supply to its business and accords with the intention to increase the own bought sales mix. Whilst the exact quantity of stock acquired is currently being finalised, Debenhams believes that this purchase will be beneficial for our business.
Commenting on the first half, Rob Templeman, CEO of Debenhams, said: “We are pleased with our performance during the first half of the year given the extremely difficult trading conditions experienced across the high street. We have continued to grow our top line and to take market share as consumers increasingly recognise the great value in terms of quality, price and design that our products and especially Designers at Debenhams deliver.”
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“We have said previously that our main focus is on cash profit rather than just sales and our increase in profits during the first half despite the environment is testament to this aim and to the close management of resources throughout the business.”
Debenhams stores feature a strong presence in key product categories including womenswear, menswear, childrenswear, home and health and beauty. Debenhams has a total of 144 department stores in the UK and the Republic of Ireland and 10 Desire by Debenhams stores, which is a small store concept featuring a mix of womenswear, accessories, lingerie, cosmetics and childrenswear. Debenhams has 49 international franchise stores in 18 countries and an online store.