For the six months to March 3, 2018, Debenhams reported 3.1 percent decline in gross transaction value (GTV) for the UK segment to 1,303.3 million pounds (1,850 .7 million dollars), while revenue reduced by 3.7 percent to 1,065.9 million pounds (1,513.4 million dollars). Reported group profit before tax after exceptional items decreased by 84.6 percent to 13.5 million pounds (19 million dollars) and profit after tax but before exceptional items decreased by 52.5 percent to 34 million pounds (48.2 million dollars). Profit after tax after accounting for exceptional items decreased by 84.9 percent.
Commenting on the company’s half year trading, Sergio Bucher, Debenhams CEO, said in a media statement: "The UK retail environment is undergoing profound change, and with the help of some important new senior hires, we are moving faster and working harder than ever to ensure Debenhams is well-placed to outperform in this new retail world. We expect no help from the external environment, so we are focused on delivering our Debenhams Redesigned strategy, aiming to mitigate difficult trading conditions through self-help initiatives."
International reported revenues rise 3.5 percent
In the International segment gross transaction value of 346.8 million pounds (492.4 million dollars) was 4.5 percent higher than last year and reported revenue increased by 3.5 percent to 253.3 million pounds (359.6 million dollars), the company said was driven by an improvement in performance from Magasin du Nord, which has benefited from strong digital growth, and together with the Republic of Ireland, was supported by stronger euro and danish kroner exchange rates. On a constant currency basis, international gross transaction value increased by 1.8 percent.
International EBITDA grew by 2.6 percent to 31.9 million pounds (45.2 million dollars), with operating profit increasing by 1.5 percent to 26.8 million pounds (38 million dollars) as a result of the sales growth.
In the UK, the company said, The GTV decline was a result of a volatile and highly competitive market throughout the period, later exacerbated by extreme weather conditions at the tail end of the half during a key promotional final week, where heavy snow temporarily closed almost 100 stores (including those in Ireland). This, Debenhams said, had a 1 percent negative impact on the first half like-for-like sales performance.
EBITDA before exceptional charges in the UK decreased by 39.3 percent to 71.6 million pounds (101.6 million dollars) as a result of the disappointing sales, and additional markdown. Operating profit before exceptional costs for the year, after increased depreciation costs arising from capital expenditure as invested in our Debenhams Redesigned strategy, decreased by 70.8 percent to 19.7 million pounds (27.9 million dollars).
Group like for like sales down 2.8 percent
Group gross transaction value decreased by 1.6 percent to 1,650.1 million pounds while group revenue decreased by 2.4 percent to 1,319.2 million pounds (1,872.6 million dollars). Group like‐for‐like sales decreased by 2.8 percent on a constant currency basis and 2.2 percent as reported.
The constant currency like‐for‐like sales growth, Debenhams said, reflects the mix from stores to digital, with like-for-like digital growth of 9.7 percent, with overall digital representing 18.4 percent of group gross transaction value. The components of the gross transaction value decrease of 1.6 percent and like‐for‐like sales decline of 2.2 percent. The growth in beauty, gifting and concession categories, which are dilutive to gross margin relative to higher-margin company-owned bought clothing categories, continued to impact sales mix and combined with the additional markdown resulted in a gross margin rate reduction of 160 bps.
Group operating profit before exceptional costs of 46.5 million pounds (65.9 million dollars) was 50.5 percent below last year for the 26 weeks and underlying profit before tax before exceptional items decreased by 51.9 percent to 42.2 million pounds (59.8 million dollars). Underlying basic and diluted earnings per share, before exceptional items, decreased by 51.7 percent to 2.8 pence, while reported basic and diluted earnings per share decreased by 84.5 percent to 0.9 pence.
Debenhams updates on ‘Debenhams Redesigned’ strategy
Digital sales during the first half grew 9.7 percent, with EBITDA growth of 10.3 percent. Digital sales accounted for 21percent of our UK business in the first half, with strong growth in beauty, up 16 percent year on year. Mobile demand, the company said, has continued to drive performance, with orders via smartphones growing 35 percent in H1, and now accounting for 33 percent of digital sales.
The company added that it strengthened the senior management team in fashion and home with key hires, including Steven Cook as MD of this business unit, who was previously at Canadian department store retailer Holt Renfrew, during the period under review.
On the international front, Magasin du Nord in Denmark, grew GTV by 4 percent and EBITDA by 6 percent, building on its consistent track record of good sales and profit improvement Irish stores, the company said, suffered some of the same market pressures as the UK but continue to benefit from the restructuring achieved in 2016. Middle Eastern franchise markets too continued to suffer a difficult geo-political climatebut Debenhams launched its first Southern Hemisphere store with the franchise partner in Australia. The company also continued to exit low-profit, low-growth activities and markets - three in the first half.
Debenhams lowers outlook
Following the shortfall in H1 gross margin as flagged in January, full year gross margin guidance is revised to 100bps from 25bps and cost growth has been revised from 1 percent growth to growth of 0 percent to 1 percent.
The company has paid a total cash dividends of 29.4 million pounds (41.7 million dollars) related to the 2017 final dividend of 2.4 pence per share that was paid to shareholders on January 19, 2018. The directors have now resolved to pay an interim dividend 0.50 pence per share, which Debenhams said, will absorb an estimated 6.1 million pounds (8.6 million dollars) of shareholders' funds.
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