Debenhams profits ahead of forecasts

Debenhams forecast year profit ahead of analysts' average forecasts after it cut prices to grow market share in a tough trading environment.

"Whilst the group gross margin rate for the year (to 3 September) will be flat to slightly down versus last year, headline profit before tax for the 53 week financial year is expected to be ahead of current consensus estimates," the firm said on Tuesday.

Debenhams, which trades from 169 stores in Britain, Ireland and Denmark, and 64 franchised outlets in 25 countries, said sales at stores open over a year, excluding VAT sales tax, were up 0.4 per cent in the nine weeks to August 27 but down 0.3 percent over the full year.

That compares with a rise of 1.5 per cent in the 17 weeks to 25 June.

Debenhams' current strategy is to drive cash margin by investing some of its gross margin gains into pushing top-line sales.

The firm, ranked second after employee-owned department store chain John Lewis, is also targeting growth from new stores as well as from Internet initiatives and overseas.

Debenhams said year-end net debt would be about £385m, a reduction of some 130 million pounds since the start of the year.

It said it would "continue to make progress" in the 2011-12 year despite being cautious about the strength of consumer confidence and the timing of an economic recovery.

Prior to Tuesday's update shares in Debenhams, which returned to the stock market at 195 pence in 2006 after two and half years in private equity hands, had lost 14 percent of their value over the last three months.