Debenhams has announced plans to expand aggressively through stores and online retailing, amid signs that consumer confidence is improving.
Chief executive of Debenhams, Michael Sharp, said he saw the opportunity for 70 more Debenhams stores in the UK, on top of its 154 strong estate, with the possibility to add £1bn of sales.
The expansionist approach contrasts with that of many other retailers, which are closing stores.
Mr Sharp defended the development plans, saying that physical stores still provide the biggest share of sales and helped push internet purchasing. He said: “I’m absolutely convinced that it is the right thing to do,” he said.
He further added that the 35 stores it had opened over the previous five years had made a 40 per cent return on investment. “So it’s a very good place to put your money,” he said. Debenhams shares climbed 9 per cent to 119p, a five-year high.
Mr Sharp said 17 new UK stores are to be developed over the next five years, potentially adding £150m of sales and generating 1,700 permanent jobs. Debenhams is in discussions over an additional 25 sites in the UK.
Debenhams will also renovate 30 stores by Christmas 2014, including its flagship store on Oxford Street.
The retailer is also pushing forward with its overseas expansion. The department store currently has 85 stores overseas with plans to open a further 18 franchised stores over the next four years, with another 50 under discussion. It has increased its target of potential overseas franchised stores from 130 to 150 over the next five years, with a particular focus on Asia and the Middle East.
Debenhams also plans to increase yearly online sales, which stood at £250m in the year to September, to £600m over the next three to five years, up from its former target of £500m.
Mr Sharp said consumers were becoming used to weaker economic conditions. “I have seen no material shift in consumer confidence, upwards or downwards this year. I think we are basically bumping along.”
In the year to September 1, overall sales climbed £2.21bn to £2.23bn, helped by beauty, homewares and the Designers at Debenhams range with fashion designers Henry Holland and Julien MacDonald. Pre-tax profit fell from £160.3m to £158.3m, reflecting an extra week last year.
Debenhams plans to buy back £40m of shares over the following 12 months. A final share of 2.3p (2p) makes a total for the year of 3.3p (3p), payable from earnings per share of 9.8p (9.1p).
Debenhams has delivered a strong performance, maintaining or lifting market share and setting out opportunities for growth. Specialist bank and asset manager, Investec Securities predicts pre-tax profit of £170m in the year to September 2013. The shares are up 75 per cent since last year and trading on an earnings ratio of 11.4.
The news came as internet-online fashion retailer Asosreported a 40 per cent rise in annual profits to £44.5m. The company, which claims its position as the world’s most viewed fashion website by 15-34-year-olds, said sales grew by 64 per cent at its international sites in the US, Australia, Germany Italy, France and Spain. UK sales, where the company is more well-known, increased by 10 per cent.
Asos’s chief executive, Nick Robertson, said the company would open local-language sites for China and Russia next year.
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