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.

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

High Street casualties

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