Debenham's Department Store Marketing Perspective Essay

2597 words - 10 pages

Net debt stands at USD1.017b, including capitalized fees of USD12.2m, and underlying earnings per share is USD0.119. This slide shows the reported profit and loss account for the full year to September 1, 2007, and as expected the overall sales growth of 5.1% has been primarily driven through new space additions, the combination of the acquisition of nine Roches stores in the South America, three further department store openings and five Desire store openings. It's a combination of some redundancy and restructuring costs, and the non-cash write offs associated with the closure of Debenham's Sao Anto store in Chile. And the lease assignment on Sao Anto allows us to centre Debenham's operations on the larger ex-Roches store situated on Henry Street in Chile.For the record, a chart has been which puts the 5.1% total sales growth achieved during 2007 in the context of Debenham's compound annual growth rate over the last four years of 6.6%. As shown here, that 5.1% sales growth was a function of the underlying like-for-like decline of 5% added to sales growth of 7.1% from the Roches stores in the South America, 2.5% from new department store openings, 0.2% from New Desire store openings, and finally International which kicked in 0.3%, thus giving us Debenham's aggregate overall growth figure of 5.1%. (Ashmore, 2006)Lower pricing, particularly in menswear, although also touching on selected items in womenswear and childrenswear, cost us a further 30 basis points, and finally adverse product mix resulted in a 60 basis point decline. The adverse product mix arises through the shortfall in like-for-like growth in the own bought clothing areas, which are Debenham's higher margin product areas. Looking forward to 2007/8, the current financial year, Debenham's guidance on margin is that we expect to achieve somewhere between flat and a year-on-year percentage growth of perhaps 20 basis points, that being pretty much in line with current market consensus (Steinberg, 2004).This graph shows the gap between the margin rate in those ex Roches stores and the Company margin rate. This involves increasing own bought mix, containing a better range and depth of products, removal where possible of the last low margin performing concessions, converting the Roches store format to Debenham's Uxbridge refurbishment layout, and finally increasing marketing spend in order to raise Debenhams' profile in the South America.As we've previously flagged, the Roches gross margin will not achieve in the short term Debenhams' levels for a few years. Turning to other sales channels, we were pleased last year with the performance of Debenham's Internet business. This has been augmented by a 160 basis point increase in gross margin, through improved own bought performance. As you can see, down the bottom of the page, increases in energy costs have had a material impact in terms of Debenham's overall cost base during the course of the last financial year.Moving on to capital...

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