Debenhams sees profits rise and resumes dividend

The department store group said a fall in commodity costs could see shop prices fall

Debenhams has announced a rise in half-year profits and says it will resume dividend payments to shareholders.

Pre-tax profits for the six months to 26 February were £125.3m, up almost 10% from the £114.5m same period last year.

Debenhams added that the price of commodities such as cotton could be about to fall, helping both consumers and retailers.

Meanwhile, WH Smith reported a small rise in profits despite a dip in like-for-like sales.

Improved margins meant the stationery and book retailer was able to record pre-tax profits for the six months to 28 February of £64m compared with £62m a year earlier, despite a 5% fall in sales from stores open more than 12 months.

WH Smith said it expected economic conditions "to remain challenging".

The two results come on the back of a series of gloomy outlooks from a number of leading retailers.

Next, Mothercare, HMV and Dixons Retail, which owns Currys and PC World, have all delivered cautious statements recently, while earlier this week, the British Retail Consortium reported its largest monthly fall in sales since records began in 1996.

'Encouraging signs'

Debenhams also announced that its chief executive, Rob Templeman, would retire in September.

He will be replaced by the firm's current deputy chief executive, Michael Sharp.

Half-year revenues at the department store rose slightly to £1.2bn despite what the company called "difficult" trading conditions.

However, Mr Templeman said there were "encouraging signs that commodity prices such as cotton may fall, which could be positive for both consumers and retailers in terms of pricing".

Analysts said the company was benefiting from having paid down previously high levels of debt.

Keith Bowman, equity analyst at Hargreaves Lansdown, said: "The group's debt-laden private equity past continues to be consigned to the history books, with the resumption of the dividend payment potentially marking a new chapter.

"A focus on profit margins as opposed to sales remains central to management strategy, while the willingness of its banks to refinance its previously stretched financial position has also played its part via reduced financing costs."