Debenhams early sales bring profits

Debenhams is profiting from its decision to start its summer sale a week earlier than usual, citing a 3% rise in sales. The extra trade has been bought at the expense of the retailer’s gross margin, which is now expected to remain flat for the full-year

following three previous years of growth.

“We will continue to invest some of our margin to drive top line sales,” said Rob Templeman, chief executive. “We anticipate a flat margin across the whole year, which is a very good result considering the inflationary pressures and the fact that the high street is in turmoil.”

In the first half of its financial year, Debenhams improved its gross margin by 20 basis points, but the retailer is fighting against cost price inflation, as well as depressed consumer confidence.

Mr Templeman added that the average rise in costs for the second half of the financial year was about 10 per cent, though Debenhams only intends to pass on half of this to consumers through price increases. As well as promotional activity, it is mitigating price hikes by changing the balance of its fashion ranges and ordering bigger volumes of entry-price products from suppliers to keep prices down.

“Last year, 7-packs of socks were a best-seller, but this year, there might be six in a pack, or even five in a pack,” said Mr Templeman.

Sales through Debenhams website have risen 77 per cent year-on-year, but the star performer remains its Scandinavian department store chain Magasin du Nord, which has seen like-for-like sales rise 6.2 per cent in the year to date, compared with a 1.1 per cent increase across the whole group.

There was some surprise earlier this week when Debenhams walked away from talks to acquire distressed retailer Jane Norman, which trades from 90 concessions in its stores. “Jane Norman was an OK brand that has not performed well over the last couple of years,” said Mr Templeman, adding that Debenhams new designer ranges, such as H by Henry Holland, would be capable of filling the gap.

In early trading, shares in Debenhams gained 1.05p to 69.4p, a rise of 1.5 per cent.

Image: H! by Henry Holland