Debenhams may have reported flat like-for-like sales in the year to the end of August, but the group's improving earnings profile certainly deserves recognition. That's in no small part down to a strategy of boosting the amount of higher-margin own-bought lines included within the sales mix. Indeed, adjust for various exceptional items, and pre-tax profit rose by an impressive 21 per cent year on year to £151m.
In fact, the gross margin increased by 70 basis points in the year - strip out the impact of November 2009's acquisition of Danish department store chain Magasin du Nord, and that margin uplift would have actually been 160 basis points. Own-bought sales rose 7.7 per cent overall in the period, compared with a 16.2 per cent decline in concession sales. What's more, that focus on own-bought products is ongoing, with Debenhams having undertaken extensive in-store reorganisations during the fourth quarter in order to create more space for both new and expanded own-bought brands. But that was achieved at the expense of concession space, which reduced like-for-like sales by 1.5 per cent in the financial year.
The group has continued to grow market share, too, with Debenhams' total market share in clothing, footwear and accessories having grown 20 basis points in the period. Men's clothing delivered the best performance, with a 50 basis point market share hike, while the group's children's clothing share grew 20 basis points, although market share in the important women's clothing segment remained unchanged in the period. The group also opened six new UK stores in 2010.
Admittedly, the debt pile remains heavy - but it has fallen by £73.5m in the 12-month period. Moreover, and while there's no dividend yet, payouts are set to return at the half-year stage in 2011. Prior to these figures, KBC Peel Hunt was expecting adjusted pre-tax profits of £157m and EPS of 8.7p in the year to August 2011 (£151m and 7.9p in 2010).
DEBENHAMS (DEB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 76p | MARKET VALUE: | £978m | |
| TOUCH: | 75-76p | 12-MONTH HIGH: | 90p | 52p |
| DIVIDEND YIELD: | nil | PE RATIO: | 10 | |
| NET ASSET VALUE: | 39p* | NET DEBT: | 103% | |
| Year to 28 Aug | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 1.71 | 62 | 7.4 | 2.4 |
| 2007 | 1.77 | 113 | 9.3 | 6.3 |
| 2008 | 1.84 | 106 | 9.0 | 3.0 |
| 2009 | 1.92 | 121 | 10.0 | nil |
| 2010 | 2.12 | 140 | 7.5 | nil |
| % change | +10 | +16 | -25 | - |
*Includes intangible assets of £846m, or 66p a share | ||||
