Fashion bucks a gloomy High Street trend

By Etain Lavelle for MailOnline
Updated: 04:12 EDT, 15 April 2011

Fashion stores are bucking the grim trend on the High Street by managing to tempt cash-strapped-but-savvy consumers in spite of the great squeeze on earnings.

'Lipstick effect': When consumers allow themselves a small but uplifting purchase

Debenhams is the latest retailer to report good results, following hot on the heels of online fashion house Asos, high street darling Marks & Spencer and JD Sports, all of whom provided some much-needed cheer at a time of stalling consumer confidence.

With youth unemployment at a record high, prices and taxes rising, and public sector job cuts looming, retailers need to distinguish themselves if they hope to survive, analysts say.

Debenhams, the 220-year old group with 167 stores in the UK and Ireland and 62 international franchises, said its childrenswear and womenswear divisions had done well, with health and Beauty putting on a particularly good performance.

The group has benefited from the so-called 'lipstick effect' - when consumers allow themselves a small but uplifting purchase such as lipstick, mascara or nail polish - if nothing else.

Debenhams made first half profits of £129.2m, slightly higher than the £128m analysts were expecting, and up from the previous years' £123.6m. Sales were flat.

'We think they'll be able to weather the storm better than others,' said Matthew Mceachran, a retail analyst at Singer Capital Markets.

He highlighted the group's unique Designers at Debenhams section, which showcases up-and-coming talent including Jonanthan Saunders, Roksanda Ilincic, Henry Holland and Diamond by Julien Macdonald. Mceachran rates the stock a 'buy'.

'People are trading up a little into quality,' Rob Templeman, Debenhams chief executive, told the Mail. But he warned that he is 'still cautious regarding the consumer over the balance of this year'.

A series of profit warnings from high street chains like HMV, Dixons and Home Retail has added to the gloom hanging over the economy has spending cuts start to bite.

But in a rare bit of good news for hard-pressed households, inflation slipped back to 4% in March, from 4.4% in February, as retailers slashed prices in a bid to lure canny shoppers.

Templeman offered some further cheer and said the price of commodities including cotton - which had reached record highs due to flooding and increased demand - may fall in future months.

Shares in Debenhams were down 0.25p at 66.55p.

It also announced that Templeman is to step down as chief executive after eight years. He will be replaced by Michael Sharp, who has worked for Debenhams since 1985.