British department store group Debenhams has reported increased profits over the Christmas period, but gave warning of an uncertain year ahead in the light of the VAT increase and the impending general election in the UK.
The group, which has 144 department stores in the UK and Ireland, and a franchise to be inaugurated in Malta later this year, reported a 0.1 per cent increase in like-for-like sales in the 18 weeks that ended on January 2, in line with forecasts.
Total sales, excluding the recent acquisition of Magasin du Nord, the Danish stores group, rose by 1.6 per cent and the company said that it continued to win market share, notably in menswear and children’s clothes.
However, analysts said that the company had underperformed peers, pointing out that House of Fraser increased like-for-like sales by 7.1 per cent in the eight weeks to January 2 while John Lewis reported growth of 12.7 per cent in the five weeks to January 2.
Debenhams said that the decision to devote more space to own-bought merchandise, reducing the amount of concessions space, had reduced like-for-like sales by about 1.5 per cent over the 18-week period.
Rob Templeman, Debenhams chief executive, said that he was pleased with the start to the financial year.
“Our continued focus on cash margin means that, for the second year in succession, we have delivered an increase in profit before tax over the Christmas trading period,” he said.
But he admitted that the forecasts for the rest of the year was far from clear.
“Looking forward, with the rise in VAT and a general election pending, the consumer environment remains uncertain and difficult to predict,” he said.
However, Rob Templeman remained upbeat about the group’s ability to continue improving gross margins during the rest of the year through the expansion of its exclusive Designers at Debenhams ranges, including Principles by Ben de Lisi and H! by Henry Holland.
The group’s cash generation allowed it to make an additional voluntary repayment of GBP 75 million of gross debt and buy back a further GBP 17 million of shares in the market.
Capital expenditure for the year will be about GBP 115 million, excluding the Magasin du Nord deal.
Shares of Debenhams fell by 2p to 76p in early trading yesterday.