Marcus Evans Group | Worldwide Headquarters | American Offices | Latin America | European Offices | African / Asian Offices

Debenhams shares rise 3% after price cuts boost sales and profits, as FTSE edges higher

Markets appear to be taking the latest developments in the Eurozone debt saga fairly calmly – perhaps crisis fatigue has set in – with shares in the UK, Germany and France moving higher.

In a relatively quiet day for corporate news, Debenhams is standing out with a 1.7p rise to 61p – up nearly 3% – after a positive trading update.

The department store chain said it gained market share in clothing and beauty, by cutting prices to meet demand in the tough trading environment. So while gross margins for the year would be flat, profit would be ahead of City expectations.

Overall it saw a good trading performance in the ten weeks to the end of August, which helped like for like sales for the year rise 1.2%. Online and mobile sales and in-store ordering jumped 71.9%, while its Dutch business Magasin du Nord saw sales rise 4.8% on a sterling basis. Chief executive Michael Sharp said:

We believe our decision to maximise cash profit by investing in top line growth has proven successful and this will result in headline profit before tax for the year coming in ahead of concensus forecasts.

Although we remain cautious about the strength of consumer confidence and the timing of an economic recovery…we are confident we can continue to make progress over the coming year.

Analysts were less convinced, with Espirito Santo saying:

This is an in line set of trading numbers with a seemingly small beat (£1m-2m on a 52 weeks basis) at the pretax profit level. That said, the lack of new shopping centre developments limits short to medium-term top line growth whilst improvements in bottom line are driven by the well-covered transition to increasing own bought ranges. This is not as compelling a story (in terms of scale or financial impact) as the more fundamental shift in sourcing at Kingfisher, nor the management and cashflow generation of clothing peer Next.

Still, the rise in Debenhams’ shares has helped lift the FTSE 250 up 37.27 to 10266.28, while the FTSE 100 is up 33.12 points to 5292.68 and the German Dax has added 1.2% and France’s Cac 0.59%. This is despite the news that Standard & Poor’s – not as expected Moody’s – has downgraded Italy’s credit rating, and Greece is still struggling to avoid a default. Manoj Ladwa, senior trader at ETX Capital, said:

Financial markets are acting fairly robustly across most asset classes despite the increasingly negative news flow, suggesting traders are yet to switch into full risk-off mode. Within the first hour of trading, equities have moved into the black having started off the day in negative territory, as investors opt for stocks with more defensive qualities.

But any rally could be short-lived as the market waits in anticipation for the Federal Reserve to show its hand. While the market is not expecting another round of quantitative easing, if the Fed fails to implement measures to further stimulate the US economy, asset prices could retreat fairly sharply.

With gold moving higher as its safe haven attractions come back into the spotlight, precious metals miner Fresnillo is the biggest riser in the leading index, up 44p at £19.11. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds