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“Our ambition is for Debenhams to be a leading international, multi-channel retailer.”

Michael Sharp, Chief Executive

Chief Executive's review

This is my first report to shareholders as Chief Executive, although I am far from new to Debenhams. This is a business I am truly passionate about and it is a privilege to lead such a talented and committed team. I want to share with you my thoughts on 2011 and my plans for taking the business forward over the next few years, setting out what I believe is a clear strategy for growth.

2011 highlights

We were pleased with the performance of the business in 2011 despite the difficult trading environment. We have now delivered seven consecutive halves of growth in sales and profit before tax which is a great achievement given the market environment we have faced during this period. You can read about our financial performance in detail on pages 28 to 30 but let me give you some of my highlights of the year.

Gross transaction value, like-for-like-sales including VAT and profit before tax all increased during the year. Another year of strong cash generation saw net debt fall and the dividend reintroduced. Overall these are strong results and are a testament to our pragmatic and flexible approach to trading which aims to maximise cash margin in a challenging market.

Growing market share is a key goal for Debenhams. In 2011 we saw growth in key product categories including menswear and childrenswear (source: Kantar Worldpanel Fashion, 52 weeks to 4 September 2011 vs 2010). We also gained share in women’s casualwear which is one of the product areas we have specifically targeted as an opportunity for market share growth.

Focusing on UK retail

Improving and widening the reach of the brand in the UK

  • UK stores are the engine room of the business and remain as relevant as ever
  • We are improving the performance of UK core stores ahead of modernisation
  • We are accelerating our store modernisation programme: all 45 core store modernisations will be completed by the end of 2013
  • We will continue to open new stores in target locations; nine new stores are contracted, nearly 30 more are in discussion


Increasing availability and choice through multi-channel

  • Online sales will grow to £500 million over the medium-term
  • We are giving customers more choice of products, brands and ways to shop
  • We are increasing availability through instore ordering and “Endless Aisle”
  • We are ensuring that we have the right technology and logistics to deliver our ambitions

Delivering a compelling customer proposition

Living up to our brand promise

  • Our brand and product strategy will ensure we have the right products at the right prices
  • Designers at Debenhams will continue to be the cornerstone of our brand strategy and we aim to grow it to £750 million of sales over the medium-term
  • We are raising our standards instore
  • We are communicating the proposition differently through a more joined-up approach to marketing


Expanding the brand internationally

  • We will double the number of international franchise stores over the next five years
  • We are continuing to make progress at Magasin du Nord
  • We will use Magasin as a blueprint for other acquisitions
  • We will grow international online to 20% of total online sales over the medium‑term


We are building on the existing successful strategy to make Debenhams a leading international, multi‑channel retailer.



“Sustainability” has taken on a number of different meanings in recent years. For some it is inextricably linked with climate change. For others it chiefly relates to biodiversity or to resource management. At Debenhams, we employ a much broader definition of sustainability and see it as the capacity to endure.

Debenhams has been in business for over 230 years, during which time it has grown into the leading retailer it is today. We believe that by doing the right things for our stakeholders we can continue to grow and will be here for the duration. At the same time, sustainability has to be about driving overall business performance, now and in the future, by increasing sales and profits and by reducing current or potential costs.

The Sustainability Committee was formed in October 2010 and includes representatives from a range of disciplines across the business (in no particular order): buying and merchandising; store operations; supply chain; environmental, energy and building management; logistics and distribution; finance; human resources; communications; risk management; health and safety; and legal.

Amongst its members are some of the business’s most senior executives. The Committee meets on a quarterly basis, under the chairmanship of Debenhams’ non-executive director Martina King with the work groups meeting more frequently as required. PricewaterhouseCoopers LLP has provided guidance and facilitation and has helped to set the terms of reference for the Committee, as well as supporting individual work groups as required.

Financial highlights*


Gross transaction value






Headline profit before tax



Basic earnings per share



Dividend per share


*All numbers calculated on 53 week basis


Strategy   2011 performance   KPI
Gross transaction value

Gross transaction value (GTV) is a measure of overall sales in the business and includes both own bought sales and concession sales. The board believes GTV is a good guide to the overall level of activity in the Company.


Debenhams reported a pleasing increase in GTV of 4.5% in 2011 (2.9% on a 52 week basis). It was driven by new UK store space from stores opened in 2010 and 2011 and growth in Magasin and the international franchise stores as well as online sales growth in the UK.


Gross transaction value £m

Like-for-like sales

Like-for-like sales provides a measure of annual sales performance from stores that have been open for one year or more. This metric is therefore an indication of organic sales growth.


Like-for-like sales for the 52 weeks to 27 August 2011 fell by 0.3%. On a VAT inclusive basis, like-for-like sales grew by 1.2%. This was a creditable performance given the bad weather during peak trading which we estimate impacted like-for-like sales by c.1% across the year as a whole.


Like-for-like sales growth %

Headline profit before tax

Headline profit before tax is the board’s principal measure of profitability.


Headline profit before tax grew by 10.0% in 2011 (up 4.4% on a 52 week basis). The main driver of growth was a lower interest charge resulting from the reduction in net debt and a lower interest rate following refinancing of the bank facility which was negotiated in July 2010 and took effect in October 2010.


Headline profit before tax £m

Net debt

Net debt is the KPI used by the board to measure balance sheet strength. Ensuring the Company has an appropriate capital structure to support its strategic aims is clearly vital.


Net debt fell sharply in 2011, ending the year £133.1 million lower than at the start. As well as strong cash generation, net debt benefited from the cancellation of a number of finance leases. Leverage (calculated as net debt divided by EBITDA) at year end stood at 1.4 times.


Net debt £m

Strategy   2011 performance   KPI
Own bought sales mix

The mix of sales between own bought and concessions is an important driver of gross margin. Own bought sales produce a higher margin than concession sales.


Own bought sales increased slightly in 2011 to 80.4% compared with 80.2% in 2010. Improvements in the own bought mix from the store modernisation programme were offset by a better performance from some concessions.

Our medium-term target remains 85%.


Own bought sales mix %

Trading space

Trading space is driven by new store openings and expansion of existing stores, usually when they are being modernised. A disciplined approach to capital expenditure ensures strong returns are generated from new space.


Three new stores were opened during the year adding a total of 193,000 sq ft of trading space. The store portfolio at year end comprised 163 stores in the UK and Ireland and 6 in Denmark. We believe we could trade from up to 240 stores across the UK and Ireland.


Trading space m/sq ft

Trading space m/sq ft
Online sales

The development of Debenhams’ multi-channel business is a key part of the Company’s strategy. Online sales are a good indicator of the performance of Debenhams’ multichannel activities as a whole as the website is the largest of the non-store sales channels.


2011 was another year of strong growth in online sales. Total sales increased by 73.8% on a 53 week basis and like-for-like sales on a 52 week basis grew by 71.9%. We expect to grow online sales to £500 million over the medium-term.


Online sales £m

Online sales £m

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You can download a PDF of the whole 2011 Annual Report using the link below. If you would prefer to build a PDF containing just the sections that interest you, you can use our PDF generator (see right).

Report 2011 Annual Report and Accounts > PDF 7.1 MB

The Debenhams difference


Debenhams gives its customers a differentiated choice of brands, products and ways to shop. One of our biggest strengths is our own brand programme which means that half of what we sell is exclusive to Debenhams, including our fantastic Designers at Debenhams ranges.

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Chief Executive's review


New Chief Executive Michael Sharp reviews the performance of the business in 2011 and outlines the four pillars of our strategy to build Debenhams into a leading international, multi-channel retailer.

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Read about the strategic pillars in detail: focusing on UK retail; delivering a compelling customer proposition; increasing choice and availability through multi-channel; and expanding the brand internationally.

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Debenhams has been in business for over 230 years. We believe that by doing the right things for all our stakeholders we can continue to grow and will be here for the duration. Learn more about the sustainability project we are undertaking.

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Financial highlights

Gross transaction value




Headline profit before tax


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Financial KPIs

Gross transactional value £m


Non-financial KPIs

Own bought sales mix %

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