Designers help fashion a change of fortunes at Debenhams

ROB Templeman's strategy to turn Debenhams around by focusing on own-brand products appears to be paying off, after the store chain yesterday posted a modest increase in half-year sales.

The chief executive, who has been trying to revive the retailer's fortunes by devoting more space to products such as its Designers at Debenhams range, said sales had risen 0.3 per cent in the 26 weeks to 27 February.

Pre-tax profits are also expected to come in ahead of the same period last year, while the company said the second half looked promising.

Templeman forecast that net debt for the full year was likely to come in "slightly ahead" of market forecasts, at 525 million.

Debenhams has experienced mixed fortunes since returning to the stock market at 195p a share in 2006 after two and a half years of private equity ownership.

Analysts raised questions over debt levels, but a 325m fundraising last June appears to have soothed concerns.

Templeman's focus on own-brand products with higher margins has met with particular approval from the City. The Designers at Debenhams range features clothing from Jasper Conran, Betty Jackson and Julien Macdonald and will today see the launch of a collection by the hip young designer Henry Holland.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: "Debenhams has concentrated on improving its gross margin, and this strategy is showing signs of success."

However, he added that, from an investors' perspective, the lack of a dividend would continue to weigh on the appeal of Debenhams' stock.

Analysts at JP Morgan Cazenove said: "Debenhams needs to re-establish the performance advantage it held over its peers in 2009 for the shares to make real headway."

Yesterday's trading update came in marginally ahead of expectations, with the majority of analysts having forecast flat sales for the half-year. The chain said pre-tax and underlying figures for the period were likely to meet market forecasts.

"As a result of higher sales and gross margin, Ebitda (earnings before interest, tax, depreciation and amortisation] and profit before tax for the first half are both expected to be higher than last year and in line with market forecasts," it said in a statement.

The company's prospects in the second half are expected to be lifted by the introduction of 150,000sq ft of space to promote the H! by Henry Holland collection and the Principles range.

Principles fell victim to the recession a year ago, but Debenhams rescued the brand from administrators and relaunched it with the help of designer Ben de Lisi.

Debenhams shares closed down 0.8p yesterday at 70.2p.