Debenhams in fashion

Poor high-street footfall data and disappointing sales at close rival Marks and Spencer (MKS) in the run-up to Christmas, meant the market anticipated a poor festive period for Debenhams. But sales fared much better than expected. In the seven weeks to 9 January 2016, constant currency like-for-like sales grew 3.7 per cent, comfortably ahead of forecasts and outperforming the wider deflationary backdrop. Crucially, the group had chosen to reduce its stock levels of outerwear - traditionally Debenhams' prime clothing category - which proved to be an especially good move in light of the mild winter weather. The group was also able to drive stronger sales of full-price items over discount or sale items. This was helped by a good Black Friday, where widespread promotions were kept under control, helping to lift sales of full-price items by 5 per cent.

This strong performance was aided by Debenhams' focus on its online business. Offering a midnight cut-off on next-day delivery and 9pm for next-day click and collect contributed to the retailer achieving 12.1 per cent online sales growth in the 19 weeks to 9 January. Internet sales also brought more customers into Debenhams' shops, with 46 per cent of online orders being collected in store in the week before Christmas. Debenhams has streamlined its processes, meaning roughly 10 per cent of online orders are able to be selected straight from the shop floor. That delivers a material saving for the distribution network, which otherwise has to move goods around the country from central warehouses.

Debenhams' online growth suggests younger customers approve of the product range and delivery options on offer. In menswear, the Hammond & Co range delivered 38 per cent year-on-year growth, with half of those customers entirely new to the store. Meanwhile a new women's clothing line - 'Nine by Savannah Miller' - was considered the group's strongest brand launch for years. It's thought younger customers were drawn to the new clothing range in part because they associated it with the designer's actress sister and style icon, Sienna Miller. The beauty department is also growing fast, as this category speaks well to the millennial generation's income bracket. Roughly 23 per cent of sales over the 19 weeks to 9 January came from this division. Fifty-five per cent of sales were of non-clothing items.

International expansion and new openings in the UK are also helping drive the group's growth. The UK estate benefited from five new openings ahead of the peak period, while the Magasin du Nord store in Denmark reported record Christmas figures (albeit at constant currency), thanks to a recovery in the local economy.

For now, one of the most pressing concerns for Debenhams' investors is who might succeed Michael Sharp as chief executive when he leaves later this year. Mr Sharp surprised the market last year when he announced his departure, although his tenure had been blighted by rumours of shareholder discontent. Batting away rumours of an ousting, he insisted it had "always been the intention" for him to serve five years in the top role. He'll be leaving the group in good shape, but the real prize will be if his successor can convince the market of a strategy to produce sustainable growth from Debenhams - something that has so far proved elusive. In the meantime, other key directors have thrown their support behind the shares. Chief financial officer Matthew Smith made a £19,000 market purchase shortly after the Christmas trading update, while new chairman Sir Ian Cheshire (formerly chief executive at B&Q owner Kingfisher) spent £313,000.