Debenhams CEO Stands Down, Results In Line

Department store retailer Debenhams PLC (DEB.LN) said Thursday Chief Executive Rob Templeman will retire after eight years at the helm as he presided over in-line first half results.

The 53-year old will make way for deputy chief executive Michael Sharp, 54, in September at the company's year end, and will remain in a consultancy capacity for a further six months.

Sharp, who has worked at the company for 14 years, said on a conference call Thursday that his strategy would be more "evolution than revolution" as the company continues to improve margins by moving from concessions to own-bought clothing sales, a prescient strategy in the current economic climate.

The fight for a share of consumers' ever-shrinking disposable income combined with continued inflationary pressures means the retail outlook is tough and likely to get tougher.

Companies which have protected their margins and profits rather than chasing sales at any cost, including clothing rival Next PLC (NXT.LN) and DIY specialist Kingfisher PLC (KGF.LN) have been rewarded with share gains, and Debenhams shares added 1.57% at 0742 GMT to trade at 68 pence.

Templeman doesn't expect consumer confidence to change in the near future, but he did say sales had improved at the start of the second half compared to across the first half of the year.

"At the start of the second half, our exit run rate was an improvement on the first half run rate," Templeman said, adding "we're not recognising some of the comments people are making about big sales falls."

Figures from the British Retail Consortium Wednesday showed a sharp drop in retail sales in March, down 3.5%, hit by consumer uncertainty about jobs and income, but also muddied by the timing of Easter, which is in April this year.

Clothing retailers have had to contend with cotton prices well above 15-year highs since November and wage inflation in manufacturing countries, both of which have forced prices up at a time when the U.K. consumer is already under pressure.

Debenhams has seen costs increase around 8% in the period, although Templeman said the company had managed to hold back around half of that increase in its store prices through better supply chain management and the changing mix of its business.

He expects prices to rise further through the autumn/winter season but cotton prices look set to fall back in time for the spring/summer collections next year, based on the commodities futures market and the incoming cotton crop.

The U.K.'s second-largest department store behind Marks & Spencer Group PLC (MKS.LN) reported first half pretax profit before exceptional items up 4.5% to GBP129.2 million, in line with market expectations, on pre-announced sales up 3.5%.

Net profit rose to GBP91.5 million from GBP80.1 million last year.

Having brought down its debt from more than GBP1 billion to GBP351.6 million, the company reinstated its dividend after a three year hiatus with an interim payment of 1 penny per share.

By Kathy Gordon, Dow Jones Newswires; 44-207-842-9293; kathy.gordon@dowjones.com

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