The key plank of Debenhams' recovery strategy has been to increase profitability by raising the amount of its own-bought lines within its sales mix, and judging by the 18.6 per cent uplift in underlying pre-tax profits, to £123.6m, the approach seems to be working.
That was better than most analysts had expected, reflecting a 70 basis point uplift in gross margins even after the impact of the acquisition of leading Danish department store Magasin du Nord - stripping that out, the uplift would have been double that. Designers at Debenhams ranges proved particularly strong, helping the group increase market share in menswear, childrenswear, and its home ranges. However, it lost share in the all-important battleground of womenswear, despite the relaunch of the much-loved Principles range.
The relatively subdued like-for-like sales increase of 0.3 per cent reflected the shift to lower own-bought sales densities, which Debenhams estimates knocked 1.5 per cent from the underlying growth rate. But online sales are still growing quickly, climbing 86 per cent in the period.
Broker Seymour Pierce expects full-year pre-tax profits of £145m and EPS of 8.3p (from £121m and 10p in 2009).
DEBENHAMS (DEB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 77p | MARKET VALUE: | £987m | |
| TOUCH: | 76-77p | 12-MONTH HIGH: | 97p | LOW: 50p |
| DIVIDEND YIELD: | nil | PE RATIO: | 11 | |
| NET ASSET VALUE: | 41p* | NET DEBT: | 97% | |
| Half-year to 27 Feb | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1.06 | 102 | 9.30 | nil |
| 2010 | 1.19 | 115 | 6.20 | nil |
| % change | +12 | +12 | -33 | - |
*Includes intangible assets of £842m, or 65p a share | ||||
