Analysis: Debenhams worked hard to keep the festive tills ringing

Chief executive Michael Sharp says this Christmas was the “most challenging” of his long career in retail, with shoppers waiting later as they shoppedaround for bargains. The Debenhams boss said that the developments in multichannel and mobile and how consumers use this technology also posed a challenge for the industry.

The high street was more promotional according to Sharp, although this worked to Debenhams’ advantage. The department store added two more days to its promotional calendar over the period, which Sharp says was “a fine-tuning” rather than a radical change to its strategy, but clearly saw the benefits as like-for-likes jumped 5% in the five weeks to January 5.

Rightly, Sharp says Debenhams’ promotional activity is one of its strengths and has been part of its DNA for over 30 years. The retailer has become a clear choice for shoppers seeking out value on the high street.

However, the extra promotions did have a knock-on effect on margin and Debenhams traded away 10 of the 20 basis points it expected to gain over the year.

Sharp is confident this was the right thing to do in order to achieve the top line growth.

However, Sharp doesn’t necessarily think that consumers’ promotional mentality will continue into the New Year. “Christmas is unique,” he points out.

But the Debenhams boss is not predicting any recovery in consumer sentiment in 2013. “In the last 15 months, we’ve seen no material difference in consumer confidence. People have become acclimatised to the new economic reality. We see no material change in this in the medium term,” he insists.

Debenhams’ success highlights two of this Christmas’ main themes. Online is big driver of growth  - Debs’ online sales soared 39% in the 18 weeks to January 5 – and it’s been a merry Christmas for the department stores; Debenhams’ success follows John Lewis’ and House of Fraser’s strong festive trading.

Sharp says the two are connected as department stores stand to benefit from the multichannel revolution.

He says: “The winners in multichannel retailing will be department stores and large choice retailers like ourselves. Department stores are very appropriate and relevant in the multichannel world where customers are looking for the widest choice and lots of ways for people to shop.”

However, where there are winners, there will be losers. With strong updates from John Lewis, Debs, HoF and Next, all eyes will be on Marks and Spencer, which updates on Thursday, to see if the good run across the major players can continue.