Debenhams today revealed that total group sales increased 2.5% during the 52 weeks to 31 August 2013, however pre-tax profit fell 2.7%. Retail Week rounds up reaction to the results.
“Overall pre-tax profit of £154m is in line with market expectations, including the benefit of £11.3m pension credit. We cut our 2014E pre-tax profit forecast by around 2.5% to reflect incremental one-off costs relating to the head office move. With momentum in store openings, online and the refurbishment programme benefits picking up in FY2014E, Debenhams has a chance to close the valuation gap once again.” – John Stevenson, Peel Hunt
“Short term, trading has been difficult over the last month because of the unseasonally warm weather and companies are beginning to see an acceleration of discounting and FY14 results, as with all the department stores, will be held back by costs related to the company developing its multi-channel offer, in our view. We also have concerns with the size of the leasing commitments.” – Freddie George, Cantor Fitzgerald
“These results represent good progress for Debenhams against the backdrop of a marketplace that remains challenging. Sales growth will be particularly heartening given that 2013 began in inauspicious fashion for Debenhams as a period of poor weather in the UK contributed to a significant fall in like-for-likes in January 2013. The response to the snow-inflicted damage of January was predictable, with Debenhams launching heavy promotional activity in February in an attempt to drive a turnaround in sales. This has the effect of eroding margins, with a profit warning following in March.
“Investments in stores, improvements in multichannel and a focus on international growth and building on the success of its well-established clothing sub-brands should help Debenhams lay the foundations for long term success. With these foundations in place, Debenhams should emerge less susceptible to the vagaries of the seasons and its fortunes will be less reliant on discounts and promotions.” – David Alexander, Conlumino
“Despite rising online fulfilment costs, the main problem is the store base, where costs rose by 1.6% and like-for-like sales fell by 2.7% (not a happy combination), so much of the focus at the results meeting at 9am will be on the guidance the finance director has given on the outlook for operating costs in the new financial year. At first sight, the statement that ‘Operating costs are expected to increase broadly in line with inflation, at 2-4%’, is not very exciting and Debenhams seem surprisingly cautious about the economic outlook…There is no comment on ‘the weather’ this autumn and current trading.” – Nick Bubb, independent