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Debenhams says Christmas sales in line, offers cautious outlook for 2010

Debenhams (LSE: DEB) said sales during the Christmas season were in line with expectations as like-for-like sales climbed 0.1% while total sales were reduced by 1.5% due to the retailer’s strategy of moving space away from concessions and into bought merchandise.

Cash generation has also been in line with forecast, resulting in a £75 million payment of gross debt with another £17 million in market buybacks of debt having been achieved since the full year results announcement in October, bringing the total to £78.4 million purchased at a discount of 5%.

Following the success of the recent refit of the Cardiff store, Debenhams will be accelerating the store refit programme as well as investing in more brand make-overs across the whole store portfolio. This investment, in addition to the acquisition of Magasin du Nord in Denmark, will result in capital expenditure guidance for the year increasing to £115 million. 

As part of its business expansion campaign, it opened three new Desire by Debenhams stores in the 18 weeks to January 2 2010 with another three scheduled to open in the remainder of the current year.

The retailer said the increase in pre-tax profits over the Christmas period was due to its continued focus on cash margin, while offering a cautious outlook for the current year.

“Looking forward, with the rise in VAT and a general election pending, the consumer environment remains uncertain and difficult to predict. Against this backdrop, we will continue to execute our strategy of improving gross margins through the expansion of our successful and exclusive Designers at Debenhams ranges...we believe that the strength of our own bought offer will enable us to expand gross margins throughout the remainder of this year,” said chief executive Rob Templeman.

Disclosure: The author holds no positions in the company