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Debenhams exceed expectations

The UK's second largest department store is staying focused on the next half of the year as the previous six months produced encouraging results
 Debenhams announce encouraging results
 
 

UK store Debenhams has posted results beyond what was expected in early 2012, but are still wary of future stunts in their development.

For the six months leading to the end of March, the second largest department store, behind John Lewis, enjoyed a 1.4 percent rise in pre-tax profits, amounting to £127.1 million.

The 164 stores in the UK and Ireland, alongside their branch in Denmark have largely attributed the recent success to the unseasonably warm autumn enjoyed by Brits in 2011. This had a direct impact on their popular outwear range, which could also have benefitted by this spring’s similarly surprising warmth.

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 During the six month period, Debenhams were also able to reduce their net debt by £71.9 million, and they now plan to give £20 million to shareholders in the not too distant future.

Although stating he was “comfortable” with the overall market outlook for 2012, Chief Executive Michael Sharp is keeping the company’s feet on the ground and remaining cautious for the coming months’ performance.

“We are mindful of the impact the wider economy may have on consumer behaviour in the second half of the year as well as the uncertain effects of the major one-off events taking place in the UK during the summer," he explained.

This is particularly in reference to the sporting events preparing to dominate Briton’s lives over the summer, especially the European football championships in June, followed of course by the London Olympics a month later.

"It's unknown the impact that these events will have but I know from experience that the football disrupts sales by causing people to spend more money on barbecues, beer and TV. I have no idea what impact the Olympic Games will have. We are being cautious as opposed to getting carried away and having a nasty surprise."

Further delays in growth may also come from the renovation of 18 stores later this year, expected to create a ten percent downturn in those shops’ sales.

On the plus side though, the Diamond Jubilee is likely to enforce some unusual trends by consumers in preparation for the big event. Based on last year’s Royal wedding, Mr Sharp has more reason to be hopeful in respect to this spectacle, with shoppers more likely to indulge in homeware items or novelty features, rather than the specific listed cliché’ items connected with sporting activities.

Overall, the signs are looking good for Debenhams, epitomised by their announced plans to open five more stores on top of the nine already planned, with a further 25 in the offing. This would increase the chain to an impressive 240 branches.

 

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