Full Year Trading Update


 

TIDMDEB 
 
RNS Number : 6099S 
Debenhams plc 
14 September 2010 
 

14 September 2010 
 
                    DEBENHAMS PLC - FULL YEAR TRADING UPDATE 
 
·     Gross transaction value up 
·     Market share gains 
·     Second consecutive year of strong PBT growth 
·     Net debt position improved 
 
Debenhams plc, the leading department store group, today provides the following 
trading update for its 2010 financial year, comprising the 52 weeks to 28 August 
2010. 
 
Sales and Market Share 
 
Gross transaction value for the year increased by 9.6% compared with the 
previous year including Magasin du Nord1 ("Magasin") and by 1.4% excluding 
Magasin. 
 
As expected, we saw a recovery in like-for-like sales in the last 10 weeks of 
the year which resulted in like-for-like sales for the 52 weeks which were flat 
on last year.  Like-for-like sales were impacted throughout the year by c.1.5% 
due to the strategy of improving gross margins by increasing the penetration of 
own bought trading space, which involved the conversion of over 530,000 sq ft of 
trading space from concessions to own bought in the fourth quarter of 2009.  We 
have continued with a strategy of tight stock control focusing on cash gross 
margin as a first priority. 
 
Market share gains were achieved throughout the year in menswear and 
childrenswear (source: Kantar Worldpanel Fashion 24 weeks market share data to 
18 July 2010 vs. 2009). Womenswear share was impacted in 2010 by lower own 
bought sales densities arising out of last year's space moves.  This will 
anniversary as we move into the first quarter of 2011. 
 
Gross Margin and Profit Expectations 
 
Consistent with the last interim management statement issued in July 2010, we 
anticipate that gross margin will exceed previous guidance.  This has been 
driven by our strategy of growing cash margin through focusing on product mix 
and gross margin improvement alongside our ongoing focus on tight stock control 
and markdown management which has resulted in historically low terminal stocks. 
Gross margin has continued to make strong progress in the final weeks of the 
year. 
 
In light of the strong gross margin performance, headline profit before tax and 
exceptional items2 for the year is expected to be in the region of GBP150 
million, an increase of some 20% over last year and up over 35% on a two year 
comparison. 
 
Strategic Initiatives 
 
Throughout the year, Debenhams has focused on its key strategic aims around the 
areas of product strategy, space expansion, multi-channel development and 
balance sheet management. 
 
In line with our product strategy of increasing our own bought offer, several 
new brands have been launched in recent weeks to add to the year's other 
successful introductions including Principles by Ben de Lisi and H! by Henry 
Holland.  These include menswear casual brand Fit For Purpose (FFP) and two new 
Designers at Debenhams collections both in the Home department, namely House and 
Home by Lisa Stickley and Butterfly Home by Matthew Williamson. 
 
Six new stores were opened during the year, comprising three department stores 
and three Desire stores.  The store portfolio at the end of the year comprised 
147 department stores, 13 Desire stores and six Magasin stores.  In addition, 
there were 60 international franchise stores in 23 countries.  Since the year 
end a new department store has opened in Bath. The store refits which commenced 
in 2010, including the major city centre stores in Glasgow and Manchester, will 
complete on schedule and we will see the full benefits of these in the new 
financial year.  A further five refits will be completed in time for the start 
of peak trading. 
 
Magasin continues to perform in line with expectations.  The early signs of 
success from the introduction of Debenhams own bought products into the Magasin 
stores - especially Field's and Odense - have continued.  We remain confident 
that Magasin will achieve the guidance previously provided. 
 
Integrating the in-store and online activities has been the focus of the 
multi-channel business during 2010.  Our aim is to provide the flexibility for 
customers to shop in the most convenient way for each purchase.  The 
multi-channel business grew strongly in the year with Debenhams Direct sales for 
the 52 weeks up 88.4% (excluding VAT) compared with the previous year. 
 
Debenhams remains strongly cash generative.  Net debt as at 28 August 2010 will 
be better than market consensus.  The process of refinancing Debenhams' debt 
facilities was completed in July, well ahead of the scheduled date of April 
2011.  The new GBP650 million senior facility comprises a GBP250 million term 
loan and a GBP400 million revolving credit facility expiring in October 2013 
with an option to extend to October 2014.  Following a proportion of the debt 
being hedged into fixed rate finance, it is anticipated that the interest cost 
net of fees will fall from circa 7.0% in the 2010 financial year to circa 4.5% 
during the first full year of the new facilities. The new facility will start in 
April 2011 on the expiry of the existing facility. Associated refinancing costs 
of around GBP10 million have been capitalised and will be amortised over the 
life of the new facility, starting in April 2011. 
 
 
Rob Templeman, Chief Executive of Debenhams, said: 
 
"We have said throughout 2010 that this would be a year of change for Debenhams 
and a year when the structural shift towards own bought merchandise means that 
we will judge our performance on profit improvement rather than sales.  With 
this in mind, I am very pleased with the overall performance of the business 
this year. 
 
"Our profit performance has been pleasing but we believe it is correct to remain 
cautious about the level of consumer confidence going forward.  There is, 
however, much to be positive about in our business, including the benefits of 
higher own bought sales, the acquisition of Magasin, the growing multi-channel 
business and the ongoing store refurbishment programme, together with the 
deleveraging of the business through strong cash generation and lower interest 
costs following refinancing.  All of this will collectively enable Debenhams to 
make further progress during the financial year ahead." 
 
Notes: 1Debenhams plc acquired Magasin du Nord, the leading department store 
chain in Denmark, during the first half of the current financial year.  Magasin 
is included in Debenhams' results from 7 November 2009. 
2Headline profit before tax and exceptional items: after adding back 
amortisation on capitalised bank fees and exceptional items. 
 
 
A conference call for investors and analysts will be held today at 9:00am.  To 
join this call, please dial +44 (0)20 7906 8567.  A recording of the call will 
be available for seven days on +44 (0)20 3364 5943 or +1 866 286 6997, replay 
code 274762#.  Debenhams will announce its preliminary results for the year to 
28 August 2010 on Thursday 21 October 2010. 
 
 
Statements made in this announcement that look forward in time or that express 
management's beliefs, expectations or estimates regarding future occurrences and 
prospects are "forward-looking statements" within the meaning of the United 
States federal securities laws.  These forward-looking statements reflect 
Debenhams' current expectations concerning future events and actual results may 
differ materially from current expectations or historical results. 
 
 
 
Enquiries 
 
Investors and analysts 
Debenhams plc 
Rob Templeman, Chief Executive 
Chris Woodhouse, Finance Director 
Lisa Williams, Investor Relations                020 7408 3304, 07908 483841 
 
Press 
Financial Dynamics 
Jonathon Brill                                         020 7269 7170 
Caroline Stewart                                     020 7269 7227 
 
 
Notes to Editors 
 
Debenhams is a leading department stores group with a strong presence in key 
product categories including womenswear, menswear, childrenswear, home and 
health and beauty.  Debenhams is the second largest department store chain in 
the UK. 
 
Debenhams operates 167 stores in the UK, Republic of Ireland and Denmark, 
comprising 154 full departments stores and 13 Desire by Debenhams stores, which 
is a small store concept featuring an edited product range.  Debenhams also has 
60 international franchise stores in 23 countries.  Debenhams' online store is 
available at www.debenhams.com. 
 
Designers at Debenhams include Ted Baker, Jeff Banks, Jasper Conran, Erickson 
Beamon, FrostFrench, Henry Holland, Betty Jackson, Ben de Lisi, Julien 
Macdonald, Melissa Odabash, Jane Packer, Pearce Fionda, Janet Reger, John Rocha, 
Lisa Stickley, Eric Van Peterson and Matthew Williamson. 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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