Debenhams plc falls on FTSE 250

The performance over 26 weeks was 1.7 pct higher than last year (0.3 pct like-the-like) whilst in the eight weeks since Christmas trading, gross margins have shown an 'improving trend'.

The company also hopes its 'own brand' products will entice customers whilst driving up margins further.

In the fourth quarter of last year, in-store space moves saw new and expanded 'own brand' spacing increasing.

The Group also announced the opening of four new stores, including the 128,000 sq ft flagship in Eldon Square, Newcasstle-upon-Tyne in the first half year.

Interim results for the half year will be announced on 13 April 2010.

Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, commented “There is a yawning gap between the market view of the company as compared to the recent performance of the shares. Today’s numbers may over the course of time go some way towards addressing the disparity.

The debt position has been largely mitigated by last year’s capital raising, and indeed has given some scope for investment in the business. Meanwhile, Debenhams has concentrated on improving its gross margin and this strategy is showing signs of success. Alongside higher sales, this cocktail has enabled the company to upgrade its expectations for first half profits. It should also mean that Debenhams is well placed to ride the coattails of an economic recovery, should it emerge. On the downside, the lack of a dividend may reduce the stock’s appeal to income seeking investors.

Regardless of the positive noises emanating from the company, market ennui remains in place towards the shares in early trade. However, despite having given up some 13% over the last six months, during which time the wider FTSE250 has posted a 6% gain, market consensus is that Debenhams is a strong buy.”