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Debenhams bucks the trend

RESULTS: Debenhams is growing solidly - thanks to a refurbishment programme, new store openings and robust online growth
October 25, 2012

Don't worry about Debenhams' (DEB) headline profit fall - the previous year's accounting period covered an extra week and, on a like-for-like basis, pre-tax profit at the department store operator rose 4.2 per cent. In-store sales were flat, but group like-for-like sales grew 2.3 per cent - thanks to a 39.8 per cent jump in online sales to £250.6m - leading management to upgrade the medium-term online sales target by £100m to £600m. The shares rose 5 per cent on the back of these figures and more upside looks likely.

IC TIP: Buy at 115p

In the UK, Debenhams refurbished 18 stores, with the remaining 30 stores due for modernisation by end-2014. The group also opened three new UK stores, one after the period ended, and management reckons that the 17 new stores in the pipeline could add £150m of sales over the next five years. Moreover, 10 overseas franchise stores were also opened, taking the total to 71 in 26 countries. Moreover, strong cash generation enabled £20.1m to be returned to shareholders through share buybacks and helped cut net debt by £15m - finance costs fell £9.4m to £17.9m.

Peel Hunt expects adjusted pre-tax profit of £168.6m for 2013, giving EPS of 10.2p.

DEBENHAMS (DEB)
ORD PRICE:115pMARKET VALUE:£1.45bn
TOUCH:114-115p12-MONTH HIGH:118pLOW: 56p
DIVIDEND YIELD:2.9%PE RATIO:12
NET ASSET VALUE:52p*NET DEBT:56%

Year to 1 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20081.841069.003.00
20091.9212110.0nil
20102.121407.50nil
2011**2.211609.103.00
20122.231589.803.30
% change+1-1+8+10

Ex-div: 5 Dec

Payment: 11 Jan

*Includes intangible assets of £865m, or 68p a share

**53 weeks