Debenhams wary despite profits rise

DebenhamsDepartment store chain Debenhams has posted higher profits but it warned the Olympics and the Euro 2012 tournament may disrupt future sales.

The group, which has 164 stores in the UK and Ireland and its Magasin du Nord chain in Denmark, reported that pre-tax profits rose 1.4% to £127.1 million in the six months to March 3, which was ahead of City expectations.
But it warned that the second half of its year could be hit by the Queen's Diamond Jubilee, the Olympics and the Euro 2012 football championships, which may cause people to divert spending onto barbecues, beer and televisions.
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In addition, the chain will refurbish 18 stores in the second half, including works to replace escalators and air conditioning, which could hit sales in these stores by up to 10% while improvements are taking place.

Chief executive Michael Sharp said: "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."

He said last year's Royal Wedding boosted sales of party wear, which he called the Kate Effect, so the Jubilee may also be positive.

The group, which has been seen as one of the most aggressive discounters on the high street, announced it will return £20 million to shareholders over the next six months.

And it said it has contracted five new stores on top of the nine it announced last year and is in discussions to open a further 25 more. It believes it can have an estate of 240 outlets in the UK and Ireland.

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