Both Debenhams and Next helped to dispel some of the gloom on the high street this morning by posting trading figures that were much better than everyone expected. The bad news is that like-for-like sales were (predictably) down at both retailers: Debenhams was down 3.3% for the last 12 weeks, while Next did even worse, recording a 7% drop in the six months to Christmas Eve. But as far as the City’s concerned, numbers like these are small potatoes at the moment – which is why Next shares promptly rose 9% and Debenhams shot up a massive 29%. Could reports of the high street’s demise have been greatly exaggerated..?
Debenhams was probably the biggest surprise of the day. The department store said its heavy discounting had paid off in the run-up to Christmas, allowing it to maintain sales in an ‘extremely difficult and volatile trading environment’ and even pinch market share from rivals. And thanks partly to higher transaction values and tighter stock control, it’s done this without sacrificing profit margins: in fact, its year-to-date margin is the same as 12 months ago, while its pre-tax profits were slightly up on the same period last year. The business also said its debts were under control, even though it opened another four stores during the period. If management is considering a rights issue (as rumour has it), today’s news should give them a bit more credit with shareholders.
Next has also been doing better than expected – or at least, less badly than feared. Although a 7% drop in like-for-like shop sales was at the bottom end of its forecasts, its Directory business surprisingly boosted sales by 1.1% during the period. And because it decided against big pre-Christmas discounts, it’s also been able to protect margins: it said today that annual profits were expected to be in line with forecasts, which always goes down well in the City. (Admittedly this figure could be 10% down on last year, but we can’t have everything).
After John Lewis and Liberty both posted decent figures yesterday, these two results suggest that pre-Christmas trading wasn’t quite as bad on the high street as some doom-mongers were predicting. Gordon Brown will no doubt claim that it’s all down to his VAT cut – but it may just be that shoppers are not quite feeling the pinch yet, so they’ve been lured by the big discounts on offer. Either way, it’s good for the Government – if not the banks and credit card companies that we probably ought to be saving our money to repay...
Then again, tomorrow morning will see Christmas figures from Marks & Spencer – and according to today’s Times, the retailer is set to announce 1,000 job losses. So enjoy this brief moment of optimism while it lasts...
In today's bulletin:
Debenhams and Next see sales fall - and their shares rise
House prices fell at record rate in 2008
FSA lifts controversial ban on shorts
Editor's blog: Down with detox
SMEs still surprisingly perky about 2009