Debenhams hopeful of falling cotton price

By This Is Money
Updated: 08:29 EDT, 14 April 2011

Debenhams signalled the recent surge in cotton prices may have peaked, which would ease some of the pressure on consumers and the margins of retailers.

Profits: Concentrating on higher-margin designer brands

The chain added that its underlying profits increased 4.5% to £129.2m in the 26 weeks to February 26, despite flat same-store sales as it concentrated on higher-margin private label and designer brands.

It gave no indication about its current trading performance but underlined its improved prospects by reporting its first dividend since 2008.

Numerous retailers including HMV, Mothercare and Currys and PC World-parent Dixons Retail have warned on profits as they have struggled to pass on rising prices to cautious shoppers, so Debenhams' prediction that costs could ease will come as a boost to the sector.

This week it emerged that the official rate of inflation dropped to 4% in March from 4.4% the previous month as retailers put on more discounts although many economists predict that prices will start to pick up again in coming months boosted by demand from emerging markets.

Debenhams, which has 167 stores in the UK and Ireland, said it was encouraged by strong sales from its exclusive ranges from designers such as Jonathan Saunders, Preen, Jonathan Kelsey and Jasper Conran.

It claimed to have grown its share of the womenswear, childrenswear, cosmetics and perfume markets, with particularly buoyant sales of lipstick, mascara and nail varnish.

Sales through its internet arm Debenhams Direct rose 82% with the help of a new mobile phone application. Best sellers included Egyptian cotton towels, Christian Lacroix perfume, Thorntons chocolates, and remote-control helicopters.

And chief executive Rob Templeman announced he will step down in September, to be replaced by his deputy Michael Sharp.

Having been in the role for eight years, this triggered a 0.2p drop in the company's share price to 66.6p - though by 13.30 it has recovered this to stand even for the day back at 66.8p

He said: 'The trading environment has been difficult but our focus on profit and cash generation has continued to deliver returns.

'Debenhams has now produced six consecutive halves of pre-tax profit growth in what has been a consistently challenging retail climate.'