So far this year, shares in Debenhams have gained more than 20 per cent. The UK's second-largest department store has indicated that sales show signs of stabilising and shopers are tentatively beginning to spend more.
However, analysts are still wary about long-term returns for the retailer, reports the Telegraph.
Like-for-sales for the company rose by 0.9 per cent in the 41 weeks to June. However, there was no improvement over the last 15 weeks compared to the same period last year.
The company's best performance was seen in its website and delivery operations. These helped sales increase 16.7 per cent over the 15-week period and 13.9 per cent in the 41 weeks to June.
Experts warn that Debenhams could be a risky investment, says the Telegraph, and a look at its previous performance can explain their concern.
The company returned to the stock market in 2006, with shares at 200p. However, shares are now worth less than half of that starting price – the closing price on Friday was 91p.
Over the past six years, the company has seen a number of false downs as it has tried to find a place on the high street. Last year, warm weather contributed to a 24.8 per cent fall in pre-tax profits.
One source of difficulty for the group is that it retains a debt burden from its days in private equity. Some progress is being made in this area – at the end of February, net debt was down £74 million compared to the same period last year, bringing it to £297 million. However, analysts expect the debt to rise to between £320 million and £340 million by the end of the year.
Austerity damaging the high street
Last week, Debenhams boss Michael Sharp warned that the government's plans for additional austerity measures were affecting consumer confidence, despite the apparent health of the economy.
"When I sit down and talk to customers, they recognise that energy is cheaper and it's cheaper to fill the car and their weekly budget for food is going further, which is great bearing in mind that not long ago there was five per cent inflation for food," he explained.
However, he added that people are aware of the government's plan to make £12 billion in welfare cuts. "They see the positive indicators but [...] they pick up on messages that say things are going to remain tough for a while, and that influences their feelings about their own financial situation," he said.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.