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Debenhams' December Sales Hit Record Numbers As British Retail Consortium Reveals High Street Is Still Struggling

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DEBENHAMS DECEMBER SALES
Debenhams performed well over the Christmas period, along with other department stores | Getty Images

Department store giant Debenhams has reported a 5% rise in its December sales for 2012, the highest number of sales in its history for the month.

The trend mirrors Debenhams' strong performance for the end of 2012; for the 18 weeks up to 5 January, like-for-like sales were up 2.9%, and, as with other retailers, online growth was a key driver, rising more than 39%.

Michael Sharp, chief executive of Debenhams, said the impressive results had been achieved by focussing on meeting the needs of customers and executing its strategy.

"We continue to believe that while consumers have become acclimatised to the new economic reality, we don't anticipate a significant change in consumer confidence in the remainder of the year," he said in a statement on Tuesday.

"We remain committed to prudent investment in key areas of the business to deliver long-term sustainable growth as well as driving shareholder value."

Business analyst for Company Watch Nick Hood told the Huffington Post UK that Debenhams positives Christmas period echoed those of John Lewis and House of Fraser, marking a strong period for department stores.

House of Fraser reported its strongest ever Christmas period on Monday, boosted by sales of handbags and menswear in particular. But John Lewis put both rivals into the shade with a whopping 15% increase in Christmas sales compared to the same period the previous year, driven by online purchases.

Hood added: "These Debenhams numbers are encouraging for a retailer still facing balance sheet challenges. Our health rating produces a score of only 12 out of a possible 100, based on a negative working capital position and intangible assets which far exceed the company's net worth. Fortunately, its debt levels are lower than a couple of years ago, when they were a genuine cause for concern."

Redmayne-Bentley stockbroker Lauren Charnley agreed it looked as though investors were being wary - she told Huff Post UK: “The festive season of 2012 was certainly stronger than the year earlier, as the department store chain announced like-for-like sales 5% higher for the five weeks to January 5th. However, despite the better than expected results, investors seemed to wary, with shares starting slightly lower, following warnings that margins will be squeezed in the full year as a result of a focus towards promotions."

However, it's not all good news in retail. Following on from Morrisons' weak festive sales period which were down 2.8% on last year, predicted by Huff Post UK last week, and predictions from analysts that Sainsbury's could see a slowdown from its strong third quarter, the rest of the sector could be in for a tough time.

Figures released by the British Retail Consortium (BRC) have confirmed that the UK high street has effectively ground to a halt, selling fewer goods than in the previous year when inflation is taken into account. Online sales grew strongly, but it appears in-store sales fell back.

Helen Dickinson, director general for the BRC, said in a statement: "Retailers knew they were facing a challenging Christmas. Some did better than others but they were generally well prepared for shoppers' limited spending power.

"After a sluggish start, the final few days leading up to Christmas saw a last-minute sales boost, as many made the most of a full shopping weekend which the calendar didn't offer in the previous year. Footfall was disappointingly low but it seems that when people did make shopping trips they bought a lot in one go.

"This rather underwhelming result brings a year of minimal sales growth to a close. Retailers will be hoping that a continuing boost from post-Christmas sales events strengthens January's figures but, unfortunately, there are few signs that their sense of ‘running fast to stand still' is likely to ease off any time soon."

David McCorquodale, head of retail at accountancy firm KPMG, added that there was evidence to suggest retailers were well prepared for the poor footfall and difficult conditions, holding less stock than normal.

"January will be a tough month for retailers as consumers face up to their credit card bills after Christmas and it's likely 2013 will bring more of the same challenges. While consumer confidence remains low, shoppers will tighten their belts and rein in their spending, making life difficult for the average UK retailer. There will be no boom and it's likely more than a few will go bust."

Company Watch's Nick Hood agreed. "The challenge for retailers is how they manage down their bloated store portfolios to limit the drag on their profitability this increasingly less relevant part of their offering represents. The other concern is how margins have been affected by the heavy and sustained discounting to which many retailers succumbed over the festive season," he told Huff Post UK.

"The results announced so far have been distinctly patchy, with stellar sales numbers from some contrasting with seriously pallid performances from others. Last year saw almost 50 national chains fail. The poor Christmas trading will claim further victims as we get further into the new year, with the casualties being concentrated among those with poor online offerings and high debt levels."

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