Department store Debenhams (LON:DEB) laid some fears to rest with a reassuring interim results statement that showed like-for-like (LFL) sales up 3.1%.
The company had already warned the market back in March that half-year profit before tax would be down to £120mln from £127mln the year before, as the bad weather hit sales, but shareholders were cheered by management holding out the prospect of better things in the second half of the year.
“We made progress during the first half although snow in late January meant we did not achieve the profit outcome we had expected. Like-for-like sales grew for the fourth consecutive half and we saw positive market share momentum in key categories,” said Michael Sharp, chief executive of Debenhams.
"We expect to make further progress in the second half despite consumer sentiment remaining weak and challenging market conditions,” he added.
Group revenue in the 26 weeks to 2 March 2013 rose 3.6% to £1,282mln from £1,238mln the year before. The group did see some erosion in its gross margin, however, which fell by one-fifth of a percentage point, suggesting that the company had to resort to promotional offers to drive sales.
The interim dividend has been held at 1p.
Shares in Debenhams were up 8.7% to 87.5p in the first hour of trading, but are still around 6p below the level they were at before March’s profits warning.
Investec said the figures were in line with the guidance given at the time of the profits warning, and drew comfort from the fact there were no new nasty surprises.
“Market share gains continue and online growth is impressive, but we continue to have some concerns on both gross margins and costs, reflected in our below consensus FY13E forecast. The recent weakness in the share price sees the stock fall back into Buy territory against unchanged forecasts and target price; this remains a high risk stock, however, in our view,” opined Investec analyst Bethany Hocking.
Oriel Securities, is also a buyer of the stock, saying: “Following a difficult couple of months, it is clear that Debenhams is managing stock aggressively whilst also ensuring that it has a compelling web offer. We expect cost efficiencies to flow through as the benefits of recent investment into its distribution network are realised.”
Oriel has a price target of 150p for Debenhams.