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DEBENHAMS CHIEF COMES OUT FIGHTING

IN STYLE: Debenhams' fashions have helped it win back market share from rivals

Wednesday June 25,2008

By Peter Cunliffe

DEPARTMENT store Debenhams yesterday hit back at critics by reporting better-than-expected sales and quashing speculation that it was in financial trouble.

The company rushed out a trading statement a week early after seeing its shares slump to an all-time low this month.

Debenhams has been dogged by rumours of flagging sales and talk that a rescue rights issue might be needed to bolster its finances.

However, chief executive Rob Templeman came out fighting yesterday, saying that, not only were the group’s stores performing well but it also had no problem repaying its debts.

The reassuring message boosted the shares from their 42bp low to 44fp, down from 200p a year ago.

In the past 42 weeks total sales rose 1.3 per cent and like-for-like sales, excluding new stores, were down 0.6 per cent, including a 1 per cent rise in the past 10 weeks, Templeman said.

Shops had won market share from rivals in key product areas, improved by the Designers at Debenhams ranges from the likes of Jasper Conran, Julien MacDonald and Betty Jackson. “It’s tough out there but I am pleased with the numbers we have reported.

“They are considerably better than others in the sector,” said Templeman.

Responding to speculation that the group was in danger of breaching banking covenants, Debenhams finance director Chris Woodhouse said: “Our capital expenditure in the current year is between £130million and £140million. If we had trouble with banking facilities, we wouldn’t be spending that.”

He added the company was keen to put the record straight about “inaccurate” market rumours and there were no plans for a rights issue. The company was on track to pay off its debts.

Debenhams’ arch-critic Mike Dennis, analyst at broker Piper Jaffray, was unimpressed and stuck to his share price target of 17p.

Altium Securities analyst David Stoddart said that while rumours of Debenhams’ demise had been exaggerated, there were challenges ahead.