UK: City sees "no quick fix" for Debenhams
- H1 profit before tax slumps 24.5%
- Group revenue up 1.7% to GBP1.30bn
- Like-for-like sales rise 1.5%
Debenhams' first-half profit before tax slumped 24.5%
There is "no quick fix" for Debenhams, according to one analyst, after the UK department store retailer saw its first-half profit decline by almost a quarter.
Pre-tax profit stood at GBP85.2m (US$142.5m) during the 26 weeks to 1 March, compared to GBP112.8m in the same period of last year.
But group revenue rose 1.7% to GBP1.30bn from GBP1.28bn last year. UK revenue declined 28.4% to GBP70.5m, while international sales edged up 0.9% to GBP22.9m.
Gross margin fell by 100 basis points, as the company needed to clear higher levels of stock during the post-Christmas sale period in the UK and the Republic of Ireland.
Total operating costs grew by 4.3%. This, the group said, was linked to increased charges in growing online sales, store establishment and its new head office.
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."
The retailer is particularly focused on offering a more competitive multi-channel service and introducing clearer promotional periods with fewer markdown days.
"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," Sharp added.
While Investec analyst Kate Calvert noted: "We are unconvinced there is a quick fix and believe the investment needed will hold back profits, though we can see a small bounce in FY15E profits from lower markdown.
"We believe management should cut back on promotions and invest in product quality as the brands have been devalued by all the discounting."
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