31 Dec 2013 10:21
31 December 2013
DEBENHAMS PLC: INTERIM MANAGEMENT STATEMENT
Trading performance
Debenhams plc, the leading international, multi-channel brand, today announces its interim management statement covering the 17 weeks to 28 December 2013.
As widely documented, the retail sector as a whole has been highly competitive with an unprecedented level of promotional activity. This is largely due to declining high street footfall, as evidenced by the BRC/Springboard Footfall Monitor, continued pressure on household incomes and the impact of unseasonal weather on clothing and clothing-related sales.
Against strong comparators from last year, we delivered Group gross transaction value growth of 0.7% and Group like-for-like sales growth of 0.1%. The better performing categories were beauty, home and gifting whilst clothing was weaker. Online sales continued to grow, increasing by 27.0% for the 17 week period and accounting for 15.6% of total sales compared with 12.4% for the same period last year. However, online delivery income was lower than anticipated.
Gross margin declined in the 17 weeks due to product category mix and higher markdown. We did not experience the anticipated final surge in sales in the last week of the period and as a result we expect the need for additional markdown to clear stock in January and February. Our expectation for gross margin for the first half is a decline of between 80 and 100 basis points.
Costs increased in line with guidance provided in October and the measures we introduced to improve online efficiency and reduce fulfilment costs were successful.
The above factors, combined with continued caution over consumer sentiment, means that we now expect profit before tax for the first half to be in the region of £85 million (H1 2013: £114.7 million adjusted for IAS19R).
Financial position
As previously highlighted, we have a clear order of priorities for the use of cash, namely (1) investing in the business, (2) paying the dividend, (3) reducing net debt/EBITDA and (4) share buyback. Given current trading, the board has decided to focus on the first three priorities and cease the buyback.
There have been no material events or transactions which have impacted the Group's financial position since the previously announced balance sheet dated 31 August 2013.
Michael Sharp, Chief Executive of Debenhams, said:
"As has been widely commented on in the media, the market was highly promotional in the run up to Christmas and we responded to these conditions to ensure our offer was competitive. However, this extremely difficult environment has inevitably had an impact on both our sales and profitability.
"Looking forward, I expect conditions to remain highly competitive as we enter 2014. Everyone in the organisation is focused on improving performance and growing the business, building on the four pillars of our strategy which I remain confident will lead to success over the longer term."
Enquiries
Analysts and Investors
Lisa Williams, Debenhams plc 020 3549 6304, 07908 483841
Media
Simon Sporborg, Brunswick Group 020 7404 5959
Tim Danaher, Brunswick Group 020 7404 5959
Notes to editors
Debenhams is a leading international, multi-channel brand with a proud British heritage which trades from 240 stores across 29 countries and is available online in 67 countries. Debenhams gives its customers around the world a unique, differentiated and exclusive mix of own brands, international brands and concessions.
In the UK, Debenhams has a top five market share in womenswear and menswear and a top ten share in childrenswear. It is a market leader in premium health and beauty.
Debenhams has been investing in British design for 20 years through its exclusive Designers at Debenhams portfolio of brands. Current designers include Abigail Ahern, Jeff Banks, Jasper Conran, Vicki Elizabeth, FrostFrench, Patrick Grant, Henry Holland, Betty Jackson, Ben de Lisi, Julien Macdonald, Jane Packer, Jenny Packham, Pearce Fionda, Stephen Jones, Markus Lupfer, Todd Lynn, Preen, Janet Reger, John Rocha, Jonathan Saunders, Marios Schwab, Ashley Thomas, Eric Van Peterson and Matthew Williamson.