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Debenhams new chief executive outlines multichannel ambitions

Online sales were up by more than 70% at Debenhams, which says investment in multichannel on the high street and online is a key pillar of its strategy for future growth.

Debenhams’ new chief executive today laid out his vision to make the department store a leading international multichannel retailer. Michael Sharp, who took over the role from Rob Templeman in September, said selling through a variety of channels helped to satisfy “demand not currently being met and to offer customers more choice.”

“Overall we are optimistic about our prospects and believe we have a clear strategy to build the business into a leading international multichannel retailer,” he said.

He was speaking as Debenhams unveiled a more than 70% rise in online sales during its latest financial year. Online gross transaction value was up by 73.8% at £180.4m in 53 weeks to September 3, while like-for-like online sales in the more standard 52 weeks rose by 71.9%. Online now accounts for 7.4% of Debenhams’ total sales.

Total Debenhams sales rose to £2.209bn in the 53 weeks to September 3, up by 4.2% compared to last year. When sales were compared over the more standard 52 weeks, they were up by 2.7% at £1.176bn. Like-for-like sales rose by 1.2% during the period, when VAT was included, but were down by 0.3% when it was excluded. Debenhams said this was a “good result given the difficult economic environment and the disruption to sales from the adverse winter weather across the UK in November and December.”

Pre-tax profits rose to £160.3m from £139.9m. That’s a rise of 14.6% when the 53 weeks of this financial year are compared to the 52 weeks of the last financial year, but a rise of 8.6% to £151.9m when 52 weeks of the 2010-2011 year are considered.

Increasing availability and choice through multichannel sales is one of Sharp’s four key strategic aims outlined today. It takes the form of providing more ways for customers to buy, from kiosks that are now installed in almost all Debenhams’ stores to providing the ability to buy via mobile. Debenhams now offers both a mobile website as well as apps for iPhone, Nokia and Android smartphones that have so far been downloaded 650,000 times between them. There is also an iPad app.

It also means widening the range of products available, with new online-only brands and product categories. The kiosks, for example, offer customers the chance to buy online products that are out-of-stock or not carried in their local store. Debenhams said they effectively double the range of products in the average Debenhams store and increase by five times the range available in a small store.

International sales are a second pillar of the strategy, and the company today also said it planned online deliveries to more countries, while it is also looking to double its overseas franchise stores, now at 65, in the next five years.

The remaining strategic focuses are on UK retail and on delivering a “compelling customer proposition” through product presentation and a “more joined-up approach to marketing” through traditional and new media. Debenhams is to modernize 45 of its 163 UK and Ireland stores over the next two years, following the completion of 11 improvement schemes so far. There are concrete plans for 10 new stores, including one in 2012. The company says there is potential for 240 UK stores in total.

Capital investment rose to £114.0m in 2011, up from £98.8m in 2010 and is expected to rise to £120m in 2012. Most of the investment went into multichannel systems, as well as a new distribution centre and store modernization.

At the same time, net debt was down by £133.1m to £383.7m at September 3, compared to the previous year.

Sharp added: “Debenhams has had an excellent year with sales and profit before tax both increasing. We have demonstrated the resilience of the department store model by trading well in a challenging market.

“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.”

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