Department store Debenhams has announced plans for a major high street expansion despite reporting a fall in profits.
In the six months to March, overall profits fell by 5.4 per cent to £120.3 million. Heavily contributing to this issue was a 10 per cent drop in like for like sales during the final two weeks of January, at which time the first snowfall of winter played havoc with the end of the post-Christmas sales period.
While Debenhams pulled out all the stops to make up for the previous month’s poor performance in February, full recovery was simply a bridge too far in the current economy. As a result, the retailer was forced to post a profit warning last month which largely forecast the half year results accurately.
Michael Sharp, chief executive of Debenhams, blamed the snow for the troubles faced by the chain in the first half, although expressed his optimism for a more successful second half.
He said; “We made progress during the first half although snow in late January meant we did not achieve the profit outcome we had expected.
“We expect to make further progress in the second half, despite consumer sentiment remaining weak and challenging market conditions.”
Fortunately, Debenhams was able to reveal some good news in the report which has been received positively by market analysts. Although profits fell considerably, company like for like sales managed to grow by 3.1 per cent – a respectable performance in the present sluggish retail environment.
Much of the acclaim for this achievement belongs to the success of the retailer’s online platform, which has managed to draw in a multitude of online shoppers. In fact, according to Debenhams, the website performed well ahead of market rivals in the first half with an impressive sales growth of 46 per cent.
Additionally, refurbishments at nine of the retailers’ 155 stores were completed during the first half, with improvements for another 12 stores already in the pipeline. This work is expected to be completed by March 2014.
However the announcement that Debenhams has identified sites for a further 70 outlets will come as a surprise to many analysts.
Chief executive Michael Sharp explained the move by saying that, despite the company being 200 years old this year, he would describe their store portfolio as ‘immature.’ He continued to say that, even given the increasing growth of online shopping, there are still opportunities to trade profitably in bricks and mortar outlets.
