Debenhams reports a strong start to 2012.
High-street trading has certainly seen its share of woes, with a pretty depressing Christmas trading period for many, and few are expecting 2012 to be much better.
But a trading update today from Debenhams (LSE: DEB) suggests the pessimism may be overblown, and we could be starting to see signs of a shopping recovery.
Over the six months ending 3 March, Debenhams described trading as "resilient", with like-for-like sales for the period rising by 1.4% (ex-VAT by 0.3%). But more tellingly, like-for-like sales for the eight weeks to 3 March were up 2.4%.
A successful winter sale added a nice boost to those figures, and the company also reported a good start to the Spring season.
Chief executive Michael Sharp was upbeat about the second half, too, saying: "While it is prudent to remain cautious about the health of the wider economy and the impact this may have on consumer behaviour in the short-term, we remain comfortable with the outlook for the full year."
Shares on a roll
Debenhams had previously issued an interim statement in early January, telling us of a decent December despite the troubles that some were facing, and that was enough for canny investors to get in on the act. Since then, the share price has put on nearly 30%, for one of the best high-street share performances in the market. Today's update, though, has only added 0.6p to the price as I write, and it currently stands at 76.3p.
But if full-year results come in as expected, the shares still look good value despite that recent rise, with the firm's prospective price-to-earnings (P/E) ratio for 31 August looking to be around 8.5, which is way below the FTSE average. And the City has a return to strong dividends pencilled in, too, suggesting a full-year yield of 4.2%.
Current forecasts indicate a P/E for 2013 of 7.9 and a dividend yield of 4.8%. Full first-half results should be with us on 19 April, and they'll be worth a closer look.
Signs of more to come?
But more than just a portent of better times for Debenhams, this upbeat update could well signal the start of the next general retail recovery.
We have more retailers bringing us news this week, including Kingfisher (LSE: KGF), the operator of B&Q and Screwfix, and Next (LSE: NXT), one of our less faddish purveyors of fashion. We should have a clearer idea of how the high street is going by the end of the week.
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