Decision to sacrifice profits for sales pays off for Debenhams

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DEBENHAMS reported record sales over the festive season, helped by strong growth in online trading and a barrage of cut-price promotions to lure in shoppers.

Debenhams’ like-for-like sales rose 5.0 per cent in the five weeks to January 5.

The department store chain, the UK’s second biggest after John Lewis, sacrificed profits in order to attract shoppers.

The group ran promotions for two more days in the 18-week period than in the previous year, including one-day specials offering discounts of up to 50 per cent.

As a result, gross profit margin for the 2012-13 fiscal year is likely to rise by just 10 basis points, down from the previous guidance of an increase of 20 basis points.

Debenhams’ chief executive Michael Sharp said the Christmas period was the most competitive he has seen in his 37-year retail career.

“Christmas shopping came very late, not only did customers have less money to spend, they’ve now become acclimatised to the new economic reality.

“They were extremely canny about how they spent their money,” he said.

Mr Sharp said Debenhams’ performance, when compared with a survey from the British Retail Consortium which showed a sales increase of just 0.3 per cent in December, showed the group is “definitely winning and somebody else is losing big time”.

Britain’s biggest clothing retailer Marks & Spencer is expected to report a decline in general merchandise sales when it posts quarter figures tomorrow.

John Lewis has already reported bumper Christmas takings and clothing retailer Next raised profit guidance after a solid festive season.

Debenhams’ like-for-like sales in the 18 weeks to January 5 rose 2.9 per cent.

Online sales were the star performer, with sales up 39 per cent over the 18 weeks, ahead of the firm’s expectations.

Online sales now account for 12.6 per cent of Debenhams’ total sales, up from 9.3 per cent this time last year.

Mr Sharp said that mobile phone shopping is helping to drive online sales.

“Mobile was a huge story this Christmas – 36 per cent of the traffic to the website came via mobile devices,” he said.

Mr Sharp said he is confident Debenhams’ like-for-like sales momentum will continue over the coming year, helped by its wide range of products and large customer base. We continue to believe that whilst consumers have become acclimatised to the new economic reality, we don’t anticipate a significant change in consumer confidence in the remainder of the year,” he said.

The group said that its first Christmas advertising campaign for six years was “well received” by customers.

Best-sellers over Christmas included its Jonathan Saunders Edition red coat, which was its fastest-selling coat ever after appearing in the ‘Christmas Made Fabulous’ television adverts.

Julien MacDonald party dresses also sold well, while it said designer lingerie sales were up 14 per cent in the week before Christmas.

‘Onesies’, all-in-one romper suits for adults, were its best-selling sleepwear.

Debenhams, which has stores in Leeds, York, Sheffield, Harrogate, Doncaster, Scarborough, Hull and Wakefield, has announced plans to open another 17 UK stores over the next five years.

The move, which is set to create 1,700 jobs and add more than £150m in sales, comes on top of a nationwide store revamp programme which has seen 18 shops modernised over the past year.

ros.snowdon@ypn.co.uk