London-headquartered Debenhams has recorded a 10 per cent increase in its annual profits after it used price cuts to boost its market share.
The UK’s second biggest department store group beat forecasts to post underlying pre-tax profits of £166.1m for the 53 weeks to September 3. On average, analysts had predicted profits of £162m, according to a poll by Debenhams, which has 169 shops in Britain, Ireland and Denmark.
Total sales increased by 2.9 per cent to reach £2.68bn, as reported last month along with its market share gains, but sales at stores which have been open for more than a year fell by 0.3 per cent. Debenhams, which is the second biggest UK department store after London-based John Lewis, plans to boost profits by investing some of its gross margin into driving sales.
Debenhams chief executive Michael Sharp said: “It is right to remain cautious about the strength of consumer confidence over the next 12 months given the uncertain economic outlook. We will therefore continue to run the business with tight management of costs and stocks, retaining as much flexibility as possible in the supply chain to enable us to deal with whatever the market presents.”
“We will take a pragmatic approach to trading and continue to focus on maximising cash profit. Overall we are optimistic about our prospects and believe we have a clear strategy to build the business into a leading international, multi-channel retailer,” said Sharp.
Debenhams finished the year with net debts of £383.7m, down £133.1m on the figure recorded at the start of the year. It will pay a total dividend of three pence and said it plans to start a share buyback programme in the second half of the financial year of 2012.
Sharp, the new boss of the department store, said the UK high street was “alive and well” and announced plans to open nine new stores and revamp 25 outlets in the next four years. The retailer announced 20 new store refurbishments in June, while the expansion drive is expected to create 4,050 new jobs.
Sharp said: “This is a strong signal that the UK high street is alive and well and we are backing it 100 per cent. It also shows a very real commitment to our clear focus on growing our UK retail business.”
Last week the department store said it would create 6,500 seasonal jobs in the run-up to Christmas.