Debenhams FY results disappoint

British department store Debenhams revealed muted sales and profit expectations for the full year. Although sales for the 52 weeks ended 2 September rose 6.6 percent, like-for-like sales only rose 0.5 percent. "We were up against quite strong comparisons of about 3 percent like-for-like this time last year," said chief executive Rob Templeman. "What we saw was that August and July were pretty strong after the really hot weather and after the World Cup. And now we are anticipating people coming into the stores to buy coats as the cooler weather comes."

Debenhams emphasized that gross margins had improved. "This, together with encouraging sales growth and continued cost focus, means that Debenhams expects to report that profit before taxation and exceptional items is in line with the board's expectations at the time of the IPO." The company was floated on the London Stock Exchange in May, with shares priced at 195p, valuing it at £1.68 billion. Since Debenhams went public it has opened two department stores in Doncaster and Workington. With another six contracts signed, 25 new department stores are scheduled to open within the next three to five years. In August, the company agreed to buy nine stores in the Ireland from Roches Stores. The agreement has been approved by the competition authorities and the stores will be converted during the course of this year. The company is also planning to open more Desire by Debenhams stores, a smaller format featuring designer products. Currently there are five Desire by Debenhams stores in operation and contracts have signed for another three. "There are probably about 100 towns we could put this format in over the next ten years," said Templeman, concluding: "Although, as widely reported, the market was challenging in the early part of the summer, there are signs that trading conditions are improving. We continue to successfully manage our stocks and remain confident that the rigorous delivery of our strategy, together with our store expansion programme, will continue to drive the growth potential of Debenhams."

Preliminary results for the full year will be reported on 24 October.