Last year has was not "without its challenges", admits Debenhams' (DEB) chief executive Michael Sharp - he's also cautious about the strength of the consumer recovery. Bad weather and heavy promotional activity in the first half made clearing stock difficult and pushed the gross margin down by 20 basis points. But, thanks to aggressive stock management in the second half, the full-year margin was at least kept flat and Debenhams won market share - notably in clothing, footwear and accessories.
UK retail sales rose 1.9 per cent to £1.9bn, helped by a 46 per cent surge in online revenue to £366m, while international sales rose 4.5 per cent to £386m. Encouragingly, group like-for-like sales grew 2 per cent, although growth was driven by online sales. UK same-store sales actually slipped 2.7 per cent. Meanwhile, UK store openings are accelerating and refurbishments are bearing fruit, with the two stores that were opened last year having already beat sales expectations. Moreover, 16 store openings are planned over the next four years.
Despite market share gains, pricing discipline and strong online progress, higher costs pushed the group operating profit down 4 per cent to £168m - the rise in headline EPS actually reflects a £40m share buy-back programme. UK store costs also rose 1.6 per cent to £585.9m, due to higher rent, energy bills and wages, while non-store costs grew 1.5 per cent. Online costs, however, fell - thanks to logistics efficiencies. But international store costs rose, which pushed overseas profit down 8 per cent to £28.2m - although that was compounded by a £3.8m write-off at Debenhams' Romanian franchise. Next year, operating costs are likely to rise 2-4 per cent after adjusting for a £12.8m pension credit reversal, although the £7.5m cost of the new head office should be offset by gross margin gains.
Broker Oriel Securities expects pre-tax profit of £155m for 2014, giving EPS of 9.9p.
| DEBENHAMS (DEB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 103.3p | MARKET VALUE: | £1.27bn | |
| TOUCH: | 103.1-103.4p | 12-MONTH HIGH: | 125p | LOW: 78p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 61p* | NET DEBT: | 50% | |
| Year to 31 Aug | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1.92 | 121 | 10.0 | nil |
| 2010 | 2.12 | 140 | 7.50 | nil |
| 2011 | 2.21 | 160 | 9.10 | 3.00 |
| 2012 | 2.23 | 158 | 9.80 | 3.30 |
| 2013 | 2.28 | 154 | 10.2 | 3.40 |
| % change | +2 | -3 | +4 | +3 |
Ex-div: 4 Dec Payment: 10 Jan *Includes intangible assets of £877m, or 72p a share | ||||
