Happy Debenhams shows how careful planning can boost profits even in tough retail times

Customers with just a little more of the feelgood factor, as well as good strategic decision making, helped Debenhams to a higher profit in the latest half. Even though revenue only edged up, the UK-based department store group said Thursday a rise in full-price sales helped drive profits 4.3% higher.

In a season that was obviously still pretty challenging (just remember the UK weather last autumn when retail was trying to sell knits and coats in soaring summery temperatures), Debenhams seemed to get it all right.

It cut prices cleverly to maximise profit at strategic times and held its nerve on full-price goods too.

The result? Pre-tax profit for the 26 weeks to the end of February up to £88.9m ($131.6m) from £85.2m a year ago. That was despite revenue rising just 1.6% to £1.33bn, and comp sales up 1.3%. Importantly though, gross transaction value rose 2.3%.

So how did it achieve all this? Debenhams brought its ‘New Season Spectacular’ forward into H1 to align it with the customer payday cycle and boosted its same-store sales as a result. It also saw the reward of refocusing its promotional strategy in a 9% increase in own-brand, full-price sell-through.

The retailer improved its multichannel offer with more flexible delivery options and this helped drive online sales 12.7% higher. This means online now accounts for 17% of gross transaction value with mobile penetration now accounting for 42% of online sales.

Other bright spots included Debenhams’ investment in its design and buying capability that continued with a strong performance following the launch of casualwear in Principles by Ben de Lisi, fronted by Sophie Dahl, and the rollout of menswear brand Hammond & Co, with Savile Row tailor, Patrick Grant

The half also saw good performances by international franchise stores and by Magasin du Nord, which achieved local currency comp sales growth of 9.9%

Despite what CEO Michael Sharp admitted was a “difficult clothing season” last autumn when Debenhams tried to sell a seasonal offer in soaring temperatures, its customers still felt a bit more confident about their spending and that confidence seems set to continue, albeit without any hint of a spending boom.

“Looking forward, our customers tell us they are feeling a little more optimistic about the economic outlook, but they remain cautious. Accordingly we are continuing to plan prudently in the near term, while remaining focused on our strategic priorities, and are continuing to invest to ensure that our business is well-positioned to drive sustainable growth in the longer term,” he said.

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