Debenhams defies retail gloom

Debenhams made steady progress in the first six months of the current financial year, delivering steady increases in sales and profits in the face of a tough retail environment. And with net debt falling by a hefty £72m to £312m since September, the group announced plans for a £20m share buy-back programme over the next 12 months.

That it can afford such a scheme despite a major investment programme shows how much progress has been made at the once troubled department store retailer. Having completed nine store refits in the first half, the plan is to modernise 45 more over the next two years with 20 of those likely to be in progress in the second half. This will have some impact on sales, but management said it remained comfortable with full year forecasts.

Debenhams also secured five additional sites for new UK stores, which means the business now has a pipeline of 14 stores to be opened by 2017 and the aim of becoming a multichannel international retailer remain on track. Three new overseas franchised stores were opened in the six-month period, with 13 more in the pipeline, and international online delivery has been rolled out to 40 countries, helping drive a 35 per cent increase in internet sales.

Broker Espirito Santo expects full-year underlying pre-tax profits of £156m and EPS of 9.1p (from £158m and 9p in 2011).

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