Debenhams' (DEB) half-year results came in ahead of expectations. Group sales rose 1 per cent on a like-for-like basis, sending operating profit up 6 per cent to £99.4m. But don't get too excited. The rosy result was largely down to the timing of its New Season Spectacular sale, which was brought forward into the first half. Management reckons the timing change moved £3m of profit into the first six months of the year, meaning there will be an equal profit drain in the second half.
That said, Debenhams is making good progress on its turnaround strategy. Christmas traded well and costs were kept down. More flexible purchasing and better sourcing meant the UK business exited the half-year with lower stock levels. There were 14 fewer days on promotion, which led to a rise in full-price sales. This was enough to offset the margin impact of lower pricing and an adverse sales mix, so that the gross margin remained unchanged. Meanwhile, online sales grew 13 per cent, driven by a wider range of delivery options and a better website. Overseas sales rose marginally, dampened by currency movements, although its Danish business, Magasin du Nord, had a stunning six months, reporting a 10 per cent rise in profit to £24.9m.
On the store front, chief executive Michael Sharp explained that 1m sq ft of space has been underperforming. To address the problem, Debenhams is making the space work harder. That includes expanding the click-and-collect service and opening more concessions. Sports Direct (SPD) and Costa Coffee trials are being extended after progressing well. The number of Sports Direct concessions will rise to 16 by August 2016, from the existing four, to total 200,000 sq ft. The number of Costa concessions is set to double to 20. Other brands set to be expanded include Monsoon, Danish label Only, as well as food outlets. But it's not just third-party brands being rolled out, Debenhams' own Principles range will be extended, too.
Broker Peel Hunt expects pre-tax profit of £112m for the full-year, giving EPS of 7.4p, up from £110m and 7.1p.
| DEBENHAMS (DEB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 89.95p | MARKET VALUE: | £1bn | |
| TOUCH: | 89.85-89.95p | 12-MONTH HIGH: | 84p | LOW: 56p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 69p* | NET DEBT: | 35% | |
| Half-year to 28 Feb | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 1.30 | 85.2 | 5.6 | 1 |
| 2015 | 1.33 | 88.9 | 5.9 | 1 |
| % change | +2 | +4 | +5 | - |
Ex-div: 4 Jun Payment: 3 Jul *Includes intangible assets of £900m, or 73p a share | ||||
