Debenhams said sales growth slowed as the number two UK department store faced competition from a re...
Debenhams said sales growth slowed as the number two UK department store faced competition from a resurgent Marks & Spencer Group. Despite this increased competition, Debenhams' first-half profit rose 17%.
Sales at stores open for at least a year grew 5.1% in the six months to 2 March, down from 7.2% in the first 19 weeks, said chief executive officer Belinda Earl.
'There is concern that, in women's wear in particular, Debenhams is lagging Marks & Spencer,'' said Nick Bubb, a retail analyst at SG Securities, who gives the company a strong buy recommendation. 'With this M&S cloud hanging over them, it is difficult to see the shares doing much more right now.''
Shares in Debenhams have now fallen 9% in the year to 16 April, while M&S has gained 57%. Net income rose to £65.4m, or 17.5p a share, in the period to 2 March as Debenhams added designer brands such as Ben Sherman and boosted sales of its own brands such as Maine New England, Earl said in an interview.
Gross margin, or the percentage of sales remaining after product costs are subtracted, widened 0.2% in the half, as the company sold fewer goods at a discount. 'There is a preoccupation in the UK with same-store sales growth,'' said David Stoddart, an analyst at Teather & Greenwood, who recommends investors hold the stock. 'You can't grow your margins forever. You are going to have to grow your turnover.''
The Designers at Debenhams programme, where John Rocha and other designers produce outfits for the chain, is expected to exceed the target of more than £100m in sales this year. 'We continue to grow our Designers at Debenhams labels, and we will exceed our forecasts,'' said Earl.
'We will be introducing a new line of Jasper Conran menswear.''
Debenhams said it will open four stores in the coming year, adding 1,000 jobs. It now has 97 outlets. The company earned £55.7m, or 14.9p, in the first half of the previous fiscal year.
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