Debenhams beats sales expectations

DebenhamsDepartment store Debenhams has put rival Next in the shade by beating the City's sales expectations in the face of Britain's sporting summer.

Online growth of 40% and an improved share of the under-pressure womenswear market helped the chain report a 3.7% hike in like-for-like sales excluding VAT in the 10 weeks to September 1. The update was more upbeat than Next, which recently admitted that August and September had been unusually slow, with womenswear particularly badly hit.%VIRTUAL-SkimlinksPromo%
The performance, which marks an improvement on the previous 16 weeks, came despite the company's earlier warning that the Olympics could disrupt trading.

But Singer Capital Markets analyst Matthew McEachran said Debenhams, which operates 164 stores in the UK and Ireland and its Magasin du Nord chain in Denmark, had ended its financial year on a high.

He said the group was benefiting from strategic initiatives such as its store modernisation programme, its Life Made Fabulous TV advertising campaign and overseas expansion. He added: "We don't believe that Debenhams experienced much a drag if any from the summer Games."

However, the group, which is seen as one of the most aggressive discounters on the high street, confirmed that gross margins for the year would be down 0.3 percentage points as it dropped prices amid fierce competition.

Chief executive Michael Sharp said: "To deliver like-for-like sales growth in these extremely challenging market conditions is highly creditable. We do not anticipate a significant change in the economic environment in the near future but we expect to continue to make progress in 2013."

John Lewis has also reported strong sales and profits in recent weeks and some analysts believe that department store chains have this year benefited from the wet weather, which has helped draw shoppers from the high street.

Debenhams said profits for the year to September 1 will be in-line with City expectations and ahead of last year's £157.7 million. Shares in Debenhams, which has 30,000 staff, were slightly lower after the update but have risen by more than 80% in the past year as the group rolled out its turnaround plan.

This has included focusing on its exclusive Designers at Debenhams ranges, which were boosted on Tuesday with the launch of a new collection by London-based Marios Schwab. His ranges will sit alongside those by John Rocha and Henry Holland.

High Street casualties
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Debenhams beats sales expectations

Administrators sounded the death knell for Woolworths in December 2008, leading to store closures that left 27,000 people out of work. Since its collapse former Woolworths stores have become a blight in many town centres and more than 100 of the large stores still lay vacant in January 2012.

Loyal customers didn't have go without the family favourite store for long however as it reappeared online as in 2009, after Shop Direct Home Shopping bought out the Woolworths name.

The greetings cards specialist became the latest highstreet casualty in May with 8,000 jobs on the line when it was forced it into administration. Its biggest supplier, American Greetings, then bought Clintons out of administration and put the retailer through a rebrand including a new logo and complete in-store revamps.

Its contemporary format includes new fixtures and fittings and easier to navigate stores, and will be rolled out to all 400 UK stores at the cost of £16million. Bosses aim to bring the brand back to profit within two years.

Poor sales in the run up to Christmas was the final nail in the coffin for several struggling chains, including lingerie retailer La Senza, which went bust in January 2012 with 146 shops and 2,600 staff. Kuwaiti retailer Alshaya bought part of the business, which saved 60 shops and 1,000 staff.

La Senza has been struggling in a similar way to other specialist shops such as Game and Mothercare, which have been hit by cut-price competition at supermarkets and have no alternative products to help shoulder losses.

Stricken retailer Blacks Leisure, which employed 3,600 staff across 98 Blacks stores and 208 Millets stores, went into administration in Janurary 2012 after failing to find an outright buyer.

Soon after its stores were bought by sportswear firm JD Sports in pre-pack deal - an insolvency procedure which sees a company being sold immediately after it has entered administration – which saw most of Blacks' £36 million of debt wiped out.

Fashion chain Bonmarche, which was part of the Peacock Group, was sold in January when the group collapsed due to unsustainable debts, resulting in 1,400 job losses and 160 store closures. Private equity firm Sun European Partners bought 230 stores, which continue to trade with 2,400 staff.

Peacocks collapsed under a £740 million net debt mountain in January 2012 in the biggest retail failure since Woolworths. Despite being sold out of administration to Edinburgh Woollen Mill in a deal that saved 380 stores and 6,000 jobs, administrators from KPMG were forced to close 224 stores with immediate effect. This lead to 3,350 redundancies from stores and Peacocks head office in Cardiff.

The high street name continues trading as bosses work to stabilise the situation, yet a further blow was dealt this month with news that the firm's pension fund is in £15.8 million shortfall as a result of the collapse.

Game buckled under its £85m debt pile in March 2012 and was placed into administration after being unable to pay a £21m rent bill. Administrator PwC immediately closed 277 shops, with the loss of 2,000 jobs. Soon after, investment firm, OpCapita bought 333 Game stores, saving more than 3,000 jobs.

Game's demise followed a string of profit warnings and the failure of nervous suppliers, including leading names Electronic Arts and Nintendo, to go on providing the latest games, further damaging poor sales.


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