Debenhams plc’s Results Hint At Recovery

There’s more than meets the eye in the headlines on recent results from Debenhams plc (LON:DEB).

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

“Never judge a book by its cover” — and the same applies to company results, too. Debenhams (LSE: DEB) revealed that pre-tax profits were down 25% to £85.2m in the 26 weeks to 1 March 2014, and most headlines reflected this. But savvy investors will know better than to take this at face value.

Digging deeper into the retail group’s half-year results, it’s important to note that the aforementioned figure was in line with guidance — on New Year’s Eve, management brought Debenhams’ quarterly trading statement forward from 17 January to warn that it did not “experience the anticipated final surge in sales in the last week of the [Christmas sales] period”, sending the shares down by 12% on the day.

DebenhamsSo what actual fresh news did today’s update bring? Well, shareholders will point to the company’s decision to maintain the interim dividend at 1p per share as a positive sign, while group like-for-like sales increased by 1.5% in comparison to the same period last year.

Elsewhere, international growth appears to be a strategic axis for Debenhams’ potential recovery, with four new international franchise stores opening (with one closing), while international sales helped push the company’s gross transaction value (GTV) to 2.1% (broken down: UK up 1%; International up 6.8%). Management also highlighted the “strong performance” from the Danish chain of department stores, Magasin du Nord, that it owns.

Closer to home, it continues to find success in online space: group online GTV increased by 24.1% and now accounts for 15.4% of total GTV, while the cut-off for next-day delivery is to increased from 2pm to 10pm in the UK. Chief executive Michael Sharp commented:

“We are focused on building a more competitive multi-channel offer for our customers and improving the operational effectiveness of the overall business.

“The Debenhams brand remains strong with sales continuing to grow and a resilient market share performance.   Whilst we remain cautious about the strength of the UK consumer recovery, I am confident the changes we are putting in place will provide a better customer experience and, over time, stronger results for our shareholders.”

It’s worth noting that despite today’s 4% lift in early trade, shares in Debenhams are still down by more than 25% from six months ago, and at current prices fetch an attractive 4.4% yield.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Sam does not own shares in Debenhams. The Motley Fool has recommended shares in Debenhams.

More on Company Comment

Hand of person putting wood cube block with word VALUE on wooden table
Company Comment

Value has been building behind the Diageo share price

Despite the business growing, the Diageo share price first reached its current level just over 19 months ago and hasn't…

Read more »

Older couple walking in park
Investing Articles

5 stocks to buy for high and rising dividend income

I can see a host of shares to buy on the FTSE 100 offering me exceptional levels of income. Here…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I don’t care if FTSE 100 shares fall further, I’m buying them today

I'm happy to go shopping for FTSE 100 shares today, even though I accept that they could have further to…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Rolls-Royce shares are down 18% in a month and I’m finally going to buy them

Investors who bought Rolls-Royce shares have been repeatedly disappointed, but I'm willing to take a chance on them before they…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

How I’d invest £10k in a Stocks and Shares ISA today

Now looks like a good time to buy cheap FTSE 100 shares inside a Stocks and Shares ISA. These are…

Read more »

Black father holding daughter in a field of cows
Investing Articles

Today’s financial crisis is the perfect moment to buy cheap shares

I'm building a portfolio of FTSE 100 stocks by purchasing cheap shares whenever I see an opportunity. There's a good…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

I’d buy Tesco shares in October to bag their 5.4% yield 

Tesco shares have fallen lately but I think this makes them attractively valued for a dividend stock I would aim…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I would do anything to hold Diageo in my portfolio (but I won’t do that)

Diageo is one of my favourite stocks on the entire FTSE 100 and I'd love to hold it, but one…

Read more »