Department store group Debenhams will continue to reduce SKUs and maintain tight stock control after defying forecasts to report better than expected Christmas trading.
Deputy chief executive Michael Sharp said a like-for-like sales decline of 3.3 per cent in the 12 weeks to January 3 was a “creditable” performance.
Sharp said SKUs, which have already been reduced 15 per cent, will fall another 10 to 15 per cent through further own-brand consolidation. The Designers at Debenhams range generated a double-digit sales increase in the run-up to Christmas.
Stock levels, which are down 14 per cent on a like-for-like basis, will fall between 10 and 12 per cent in the spring and a further 5 per cent into autumn and winter, said Sharp.
Investec analyst Katharine Wynne said: “Debenhams’ relative success is as much about product as about promotion.”
She said Debenhams’ pre-Christmas promotional stance enabled it to outperform the market without hitting margins, which were flat.
Sharp said Debenhams will bring in new stock and return to prime trading a week earlier than last year as customers look for “something new” post-Sale.
The outlook remains “tough” but retailers can expect some respite as the cost of fuel, food and interest rates fall, he said.
He declined to comment on speculation that Debenhams may try to raise money to counter worries over its debt levels.
Debenhams gave no figures for its present debt, but said it is “significantly lower” than at the same time last year. Net debt was£994 million as of August 30.
Sharp said management are “aware that leverage needs to be taken off the agenda” and that cash required for a£100 million repayment due in April was “in the bank”.
Panmure Gordon analyst Philip Dorgan said the “better than expected numbers from Debenhams give management a strong hand if it decided that it needs a rights issue”.
He raised his recommendation from sell to hold.