The department store chain saw pre-tax profits lift by 10 per cent to £166m in the year to 3 September.
Revenues rose 4.2 per cent to £2.2bn over the year.
However, like-for-like sales, excluding VAT, fell by 0.3 per cent, while margins also narrowed.
Debenhams said it was ready to buy back shares in the second half of this financial year.
The company said it had benefitted from lower interest rates as it refinanced a large chunk of its debt.
Interest payments fell by more than half to £23.4m during the year.
But chief executive Michael Sharp, who took over from Rob Templeman earlier this year, warned that the tough consumer climate was still casting a shadow over the retail sector.
“It is right to remain cautious about the strength of consumer confidence over the next 12 months given the uncertain economic outlook,” he said.
The group said it would pay out a final dividend of 2p a share, bringing the full-year dividend to 3p a share. No dividend was paid the previous year.
Meanwhile Seymour Pierce analyst Kate Calvert said a share buy-back was not a positive move.
“The announcement that the company intends to start a share buy-back confirms to us the company’s limited growth prospects over the next few years and we feel it is a little premature given the state of the UK consumer,” she warned.
Debenhams, which owns 169 stores in Britain, Ireland and Denmark, also announced that chief finance officer Chris Woodhouse would leave in January to be replaced by Simon Herrick, who was previously at Kesa Electricals and Northern Foods.