Decision to focus on own brands reaps rewards for Debenhams

The group, which has sites in Leeds, York, Sheffield, Harrogate, Doncaster, Scarborough and Hull, has stripped back concession space in recent months to focus on brands including designer collections from Henry Holland and Ben de Lisi.

Debenhams said underlying pre-tax profits rose to 151m in the year to August 28, up from 125.2m in 2008-09.

The department store chain, ranked second after John Lewis by sales, said revenue increased 9.6 per cent to 2.56bn as the firm won market share in menswear and childrenswear.

Sales at stores open at least a year were flat compared with the previous 12-month period, while gross profit margins were up 70 basis points after the firm moved over 530,000 square feet of trading space from concessions to its own pro-ducts.

The latest project is a new designer fashion concept called Edition which will build on the group's own brand designs.

Edition will introduce emerging and established designers to Debenhams' shoppers, including fashion collections from designers such as Jonathan Saunders, Preen, Jonathan Kelsey and Roksanda Ilincic.

Debenhams already works with famous designers such as Matthew Williamson and Jasper Conran.

Rob Templeman, chief executive of Debenhams, said that although he is concerned about the general retail environment in the wake of the

public sector cuts announced by the Government on Wednesday, he is encouraged by the start to the new financial year with positive underlying sales and gross margins.

"Anything that takes money out of people's pockets will affect all retailers. It just means we have to work a bit harder," he said.

He is forecasting further growth in 2010-11 as Debenhams benefits from the space changes, more stores, growth online and overseas.

Debenhams said its product strategy had led to an increase in market share in clothing, footwear and accessories by 0.2 per cent, with the strongest performance in menswear and childrenswear.

The group said new menswear and homeware lines will be released towards the end of the year.

As part of its strategy to put margins ahead of sales, set out 18 months ago, Debenhams has also completed a series of store refits and openings, as well as developed its website.

Debenhams said a plan to reinstate its dividend in 2011 does not mean acquisitions are off the table.

The retailer said it expects to resume dividend payments in April.

"Because we pay a dividend doesn't rule out acquisitions," said Mr Templeman. "We still would have firepower if we wanted to look at other things. The free cash flow is incredibly strong."

Last year, Debenhams purchased Danish department stores firm Magasin du Nord for 12.3m and Mr Templeman has said he is keen to do more deals in western Europe, with further purchases in other Nordic areas most likely.

Mr Templeman said some shareholders are keen on a dividend payout while others want the firm to focus on acquisitions.

"If we can do both, that would please everybody," he said.

Seymour Pierce analyst Kate Calvert said: "We believe the business should deliver double digit earnings growth with a further bolt-on acquisition a possibility."

Debenhams shares closed up seven per cent last night, a rise of 5p to 76.5p.

The shares returned to the stock market at 195p in 2006 after two and a half years in private equity hands.

Retailer looks to the 'forgotten' shopper

The latest Debenhams advertising campaign features models who are in their forties, fifties and sixties and is aimed at the 'forgotten' older shopper.

The department store chain believes it is the first retailer to use models past their forties for a campaign like The Style List.

The campaign is being run with fashion commentator Caryn Franklin, herself 51, who said she was keen to work with a retailer which acknowledged the lack of fashion imagery aimed at older women and was ready to change things.

She said the campaign was "a business savvy move" for Debenhams, adding: "It's been really fulfilling to create shots that celebrate the wonder of getting older. It's important to challenge what we see in our media with a broader reflection of beauty."

The launch campaign features three looks – power dressing, casual, and party dresses – and uses models Valerie Pain, 66, Caroline Josling, 52, and Maxine Smith, 41.

Michael Sharp, Debenhams deputy chief executive, said: "The days are long gone when hitting 50 meant you were relegated to dowdy cardigans and baggy knits."

Since the start of the year, Debenhams has also launched campaigns featuring disabled model Shannon Murray and un-airbrushed swimsuit models as well as using size 16 mannequins.