Debenhams looks to 20% hike in annual profit

Debenhams has grown annual sales by 9.6% and expects profit to have surged by 20%, the retailer revealed this morning.

In a trading update on its financial year, covering the year to August 28 2010, the department store group said that a strong gross margin performance would deliver pre-tax profit in the region of £150m – up by some 20% over last year and by over 35% on a two-year comparison.

Gross margin has been driven by growing cash margin through focusing on product mix, tight stock control and markdown management. This, said Debenhams, has resulted in historically low stocks.

However, there was no improvement in like-for-like sales, which were impacted by the strategy of improving gross margins.

The year saw Debenhams continue to grow its own-bought offer, and two new Designers at Debenhams collections were recently added to the home department: House and Home by Lisa Stickley and Butterfly Home by Matthew Williamson.

Six new stores were opened during the year – three department stores and three Desire stores – bringing the total to 147 department stores and 13 Desire stores. Debenhams also owns six Danish Magasin du Nord stores.

Meanwhile, the multi-channel business grew strongly over the period, with Debenhams Direct sales up 88.4% over the previous year.

Commenting on the results, chief executive Rob Templeman 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.”

However, he warned that the business remained “cautious about the level of consumer confidence going forward”.