UK: Snow-bound start to 2013 hits half-year profits at Debenhams

Debenhams has put confidence in its new clothing ranges and a burgeoning online performance to get t

Debenhams has put confidence in its new clothing ranges and a burgeoning online performance to get the business back on track after January's snowstorms sent profits 5.4% lowe - Credit: PA

DEPARTMENT store chain Debenhams is looking to new clothing ranges and its burgeoning online performance to get back on track after January’s snowstorms sent profits 5.4% lower.

The group, which has 155 UK stores and 79 international outlets, saw profits drop to £120.3million for the six months to March 2, in line with last month’s warning after its sales slumped by around 10% during the snow-hit start to the year.

But chief executive Michael Sharp said today he was confident in the group’s spring and summer ranges and market-beating online sales, which surged by 46% in the first half.

“We expect to make further progress in the second half despite consumer sentiment remaining weak and challenging market conditions,” he said.

Debenhams said it maintained its market share last month despite enduring the coldest March for 50 years.

A 4% increase in like-for-like online sales helped offset a 1.1% fall across the high street chain in the first half and Debenhams said its internet trade grew three times faster than the market.

It is planning to launch a next day delivery service in time for Christmas under aims for online to sales to reach £600m.

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The group’s store revamp plan is also helping offset highly competitive high street trading, with like-for-like sales up 6% across shops that have been overhauled.

It completed nine store makeovers in the first half and aims to start or complete another 12 by the end of the year.

However, Cantor Fitzgerald analyst Kate Calvert warned the group may struggle to match its expectations given the tough conditions and costs of its investment programmes.

She said: “We are concerned about second half profitability and trading since the beginning of March.

“Anecdotal feedback is that the industry is having a tough time given the late start to spring.”

Debenhams said it expects a £4m hit in the second half from the cost of relocating its head office and disruption due to the revamp of its flagship Oxford Street store.

The group is also opening a raft of new stores, with another 17 in the pipeline, starting with Lichfield next month.

It reported a 0.2% rise in like-for-like sales overseas, where the group also trades as Magasin du Nord, but said six stores closed across Romania after the failure of one of its franchise partners.

Debenhams - one of the most promotional retailers on the high street - carried out heavy discounting before Christmas and in February to clear stock after the snowstorms.

This is expected to leave gross margins flat over the full-year, but Mr Sharp insisted it had been the right decision.

“Promotions for Debenhams are a strength and in a market where customers are seeking value for money, then it’s absolutely right that we emphasise our strengths,” he said.

The group enjoyed its highest ever December sales with like-for-like sales up 5%, helped by its first Christmas brand marketing campaign for six years.

It has shown resilient trading in recent years, helped by a line-up of big fashion names such as Henry Holland, Jasper Conran and Julien MacDonald, which has increased its appeal to on-trend fashion fans.

Recent designer sign-ups include Savile Row tailor and star of BBC2’s Great British Sewing Bee, Patrick Grant, who is creating a menswear range called Hammond & Co, which will launch for autumn/winter.