Debenhams forecasts higher profits for 2009 than last year

DEBENHAMS HAS predicted that its profits for 2009 will be higher than last year even though sales have been hit by changes to store layout.

The company has started to convert 10 per cent of its floor space from concessions into space for its own clothing brand, which traditionally delivers better margins. Gross margins rose 70 basis points over the year but like-for-like sales fell 3.6 per cent.

Chief executive Rob Templeman said: “Our primary focus is on margins right now. Cost control is going to see profits up on the previous year, which is a good set of figures in the current environment.”

The shares, which have doubled in the past year, fell 3½p to 81½p yesterday, with analysts saying some investors might have hoped the trading statement would lead to increases to profit forecasts.

Debenhams opened its first store in the Republic in Jervis Street in Dublin in 1997. It now has 11 stores in the Republic, which it acquired after it bought the retailing business of Roches Stores in 2006. It completed the rebranding of the stores as Debenhams in 2007.

Kate Calvert, analyst at Shore Capital, said: “People may have been disappointed there wasn’t a more significant upgrade but that was very unlikely to come at such an early stage, but having gone through quite a hard retail environment, to have profit growth is fantastic.”

Debenhams raised £323 million in a placing and open offer in June, which analysts said at the time could be used for acquisitions and to pay down debt. It has been linked to House of Fraser, its privately owned rival.

Aurora, which owns the Oasis and Karen Millen fashion brands, could also be a target, but Aurora said that Kaupthing, which controls Aurora, had no plans to sell the group.

Debenhams repurchased £61.4 million of debt over the year but Mr Templeman would not comment on the possibility of using some of the remaining cash to buy other companies. – Copyright The Financial Times Limited 2009