In the money: Debenhams outlines expansion plans
Debenhams chief executive Michael Sharp has revealed the department store retailer plans to open 17 stores in the UK over the next five years, after recording growing sales and profit during the past year.
Speaking to journalists this morning (25 October) Sharp said the retailer will also look to modernise 30 remaining stores by Christmas 2014, with plans to turn its Oxford Street location into a "real flagship". The retailer expects to complete a revamp of that store by Christmas 2013.
This year, the company modernised 18 of its core stores, with Sharp emphasising that the stores are continuing to see growth in their second year, on top of 6% growth in their first year post modernisation.
The retailer also extended its international and online goals, saying it plans to open 150 internationally over the next five years, up from earlier estimates of 130 stores. At the end of the year, the company had 85 international stores. Expansion will be through franchises and will focus on the Middle East and Far East.
Online, Debenhams upped its retail sales goal to GBP600m (US$966.8m) from GBP500m over the next three-to-five years. The online growth rate has been 2.5 times the market average, Sharp said, and is "doing better" than expected in this channel. He emphasised that these sales are incremental increases and are not cannibalising bricks-and-mortar sales.
Over the next year, the firm plans to invest additional buying and merchandising spend in its Red Herring and Ben de Lisi brands, and will run its first brand marketing campaign in six years this Christmas.
The news came as the company made "good progress" despite unseasonably warm and wet weather over the year. Group profit before tax increased 4.2% to GBP158.3m over the 12 months to 1 September. Sales increased 2.5% during the period to GBP2.2bn, rising 2% in the UK to GBP1.8bn, and international revenue increasing 4.6% to GBP369.5m.
Sharp said he was confident the company would continue this momentum going into the all-important Christmas period. While this Christmas is seen as being at least "as promotional" as last year, the promotions are expected to be different with, for example, fewer promotions on coats as the weather is more normal.
However, he warned it will be "just as challenging" as last year.
Sharp expects the economic environment to remain difficult, but believes consumers are "acclimatised to the new economic reality," and does not expect any significant change in the economic environment in 2013.
Consumer confidence has also remained largely unchanged over the past 6-9 months and they are "bumping along the bottom," said Sharp.
"Consumers have been living in a world that was classified as being in recession for a number of years now," said Sharp, "this is not new news and they have adjusted accordingly".
Conlumino senior consultant Joeseph Robinson described the result as a "quite respectable set of numbers".
He said: "In the UK, while unseasonable weather across summer and autumn has proved challenging for apparel, Debenhams' continued promotional focus held it in good stead, encouraging footfall into its stores and stimulating customers into buying.
"Indeed, the fact that sales during H2 were stronger than the year as a whole indicates that Debenhams bucked the market during this period.
"More generally, the retailer continues to benefit from an increasingly strong, differentiated product offer, underpinned by investment into its own-label, and particularly its designers at Debenhams sub-brands."
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