Tight stock control boosts Debenhams profits

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Tight management of stock played a key role in helping department store group Debenhams outperform the market for the year to 3rd September.

“Like-for-like stock unit density fell by 2.6 per cent. Terminal stock at year end of 2.6 per cent was approaching an all-time low,” the group said in its annual statement.

Like for likes sales were up 1.2 per cent, but there was significant pressure in the supply chain during 2011 and buying teams faced substantial increases in commodity prices.

“The most significant was for cotton: the calendar year average in 2011 so far is 175.2 cents/pound compared with 105.4 cents/pound in 2010 and 62.75 cents/pound in 2009 (source: National Cotton Council of America “A” Index). Action was taken to minimise average retail prices increases including: realigning range architecture; changing pack sizes; and re-sourcing some products from lower cost countries. As a result of this work, we were able to keep price increases for spring summer 2011 to c.4 per cent (including the impact of higher VAT).”

Chief executive Michael Sharp said: “It is right to remain cautious about the strength of consumer confidence over the next 12 months given the uncertain economic outlook. We will therefore continue to run the business with tight management of costs and stocks, retaining as much flexibility as possible in the supply chain to enable us to deal with whatever the market presents.

“We will take a pragmatic approach to trading and continue to focus on maximising cash profit. Overall we are optimistic about our prospects and believe we have a clear strategy to build the business into a leading international, multi-channel retailer.”

Sales for the 53 week period was £2,209.8 million, 4.2 per cent higher than last year. Group gross margin fell marginally by 20 basis points during the year on a 53 week comparison. Headline profit before tax, at £166.1m, was up 4.4 per cent on last year.

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