Debenhams sales boosted by Principles

The revival of the Principles brand helped Debenhams deliver better-than-expected underlying sales in the first half of its financial year. The company reported sales from stores open at least a year up 0.3 per cent in the first half to February 27, better than analysts’ expectations of flat like-for-like sales, and a 0.1 per cent increase in the 18 weeks to January 2. Debenhams said that in the past eight weeks it had seen an improving trend in terms of like-for-like sales and gross margin.

Debenhams bought the Principles brand last year after Mosaic, the fashion chain’s owner, went into administration. The department store group has relaunched the brand, which is now being designed by Ben de Lisi, a long-time member of the Designers at Debenhams stable. “Principles launched about three to four weeks ago. It has been our best brand launch in our history,” said Rob Templeman, chief executive of Debenhams. “The Principles brand is still loved by the consumer.” He added: “I think it will turn into one of our biggest brands.”

Mr Templeman said the arrival of the Principles range, together with a young fashion collection designed by Henry Holland, which officially launched on Tuesday, had filled about 150,000 square ft of store space freed from concessions.

Debenhams is moving away from concessions in stores to more stock that it buys in itself. Although this is disrupting sales, with the move acting as a 1.5 percentage point drag on like-for-like sales, it is more lucrative and so should boost profits.

Mr Templeman said the gross margin would be more than 100 basis points higher in the first half.

Debenhams expects first-half pre-tax profit to be ahead of last year’s £102.2m, and in line with the consensus of analysts’ forecasts of £115m-£116m. Mr Templeman said Debenhams’ net debt, which it sought to cut last year with a £300m rights issue, would be “slightly better than consensus of roughly about £525m”.

The shares, which have risen 80 per cent over the past 12 months, on Tuesday fell 0.8p to close at 70.2p on the absence of a profit upgrade.

Image: H! by Henry Holland