Focus on non-clothing categories boosts Debenhams profit

Debenhams said that group gross transaction value for the full year increased by 1.3 percent to 2,895.9 million pounds (3,538 million dollars) and statutory revenue decreased by 0.5 percent to 2,310.4 million pounds (2,822 million dollars). Underlying profit before tax and exceptional items increased by 0.5 percent to 114.1 million pounds (139 million dollars) but reported profit decreased by 10.4 percent to 101.7 million pounds (124 million dollars).

"We have delivered profits in line with market expectations, reflecting a strong performance over peak followed by a tougher second half trading environment. Our strategy to rebalance the business towards non-clothing has supported our performance, with strong progress in beauty, gifting and food,” said Sir Ian Cheshire, Chairman of Debenhams, adding, “Following the arrival this month of our new CEO, Sergio Bucher, we look forward to updating the market in Spring 2017 on our longer term plans for the next phase of Debenhams' development."

Review of the financial year

Gross transaction value for the UK segment, for the full year, increased by 1.2 percent to 2,352.1 million pounds (2,873 million dollars) and reported revenue decreased by 0.8 percent to 1,906.6 million pounds (2,330 million dollars). This, the company said, was a result of continued online sales growth and the benefit of new store openings in the first half of 2016.

Sales benefited from a strong Christmas performance, but slowed in the second half of the year as the UK clothing market became more uncertain and volatile. However, Debenhams said that strategy to increase the mix of non-clothing sales supported performance against this background, with beauty and gift sales and casual dining sales in particular continuing to show good growth. UK segment EBITDA reduced by 2 percent to 193.6 million pounds (236 million dollars) reflecting the impact of sales mix towards lower-margin product divisions. Operating profit reduced by 6.7 percent.

In the international segment, gross transaction value of 543.8 million pounds (664 million dollars) was 1.3 percent higher than last year and reported revenue increased by 0.9 percent to 403.8 million pounds (493 million dollars). Over the year, the currency impact was minimal, with constant currency international gross transaction value improving by 1.4 percent.

Debenhams said, the gross transaction value growth was driven by a strong performance in Magasin du Nord, particularly over peak trading, and some improvement in Republic of Ireland sales. It added that a number of franchise partners have sought to improve their working capital positions by reducing stock intake in the autumn/winter 2015 and spring/summer 2016 seasons and markets such as the Middle East and Russia, are also planning more prudently as a result of more difficult trading conditions. International operating profit decreased by 2.2 percent as a result of lower franchise despatches.

Group like-for-like sales up 0.6 percent

Group like-for-like sales increased by 0.6 percent on a reported basis and increased 0.7 percent on a constant currency basis. The company said, week 53 had a further 1.4 percent impact on gross transaction value with group gross transaction value on a 53 week basis increasing 2.7 percent to 2,938.5 million pounds (3,589 million dollars).

Like‐for‐like sales growth was driven by 9.3 percent growth in online sales. As a result, group operating profit for the 52 weeks to August 27, 2016, was 126.6 million pounds (154 million dollars), 5.6 percent below last year. Profit after tax but before exceptional items decreased by 1.1 percent to 92.5 million pounds (113 million dollars). Profit after tax after accounting for exceptional items decreased by 11.8 percent.

Earnings down, announces dividend

Underlying basic and diluted earnings per share, before exceptional items, decreased by 1.3 percent to 7.5 pence.

The company paid an interim dividend of 1.025 pence per share to shareholders on July 1, 2016, consistent with the progressive dividend policy outlined in October 2015. As the earnings growth (before any exceptional items) has been broadly flat on the previous year, the board is recommending a final dividend in line with last year of 2.4 pence per share. The total dividend for the year was 3.425 pence, an increase of 0.7 percent.

Picture:Debenhams