Debenhams reports 25% drop in profits but implemention of new strategy lifts shares

15th April 2014

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Shares in Debenhams lifted 3% in early morning trading following the announcement its profits had collapsed by almost 25% as a result of a “challenging” trading period writes Philip Scott.

The FTSE 250 listed retailer announced today that profit before tax fell 24.5% to £85.2m and that earnings per share dropped by 21.1% to 5.6p in the half year period to 1 March 2014. Over the term, group like-for-like sales lifted 1.5%.

By 9am its stock, which had dropped by 28% over the past six months, had risen by 3% to circa 80.45 p per share.

The business pointed to a weak Christmas trading period as partly to blame where sales were lower than expected, leading to higher levels of markdown required to clear stock in the seasonal sale period.

However the department store giant has put in place a number of strategies to help boost the business, which include expanding the brand internationally and offering a more competitive range of premium delivery options.

In a statement accompanying the market update, chief executive, Michael Sharp said: “Whilst this has been a challenging first half, we are clear on the issues and are taking decisive action to address them. In particular we are focused on building a more competitive multi-channel offer for our customers and improving the operational effectiveness of the overall business.”

He asserted however that the firm’s brand remains strong with sales continuing to grow.

Sharp added: “Whilst we remain cautious about the strength of the UK consumer recovery, I am confident the changes we are putting in place will provide a better customer experience and, over time, stronger results for our shareholders.” Presently  the broker consensus has the shares listed as a ‘sell’, according to share data hub, Digital Look.

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