Debenhams upbeat despite tough market

Debenhams said it was well placed to cope with a worsening consumer market by focussing on growing profit margins rather than chasing sales.

The department store chain, which trades from 166 stores in Britain, Ireland and Denmark and about 60 franchised outlets in 23 countries, forecast first half pre-tax profit in line with a market consensus of about £128m but said trading across the high street was likely to be difficult in its second half.

"Rises in taxation, alongside inflation and the wider economic issues will undoubtedly continue to have a negative impact on consumer disposable income. In the short term we believe retailers are not going to get much help from the macro economy," chief executive Rob Templeman told reporters.

"We believe that our focus on driving cash margin rather than just chasing sales will continue to benefit our P&L (profit and loss) over the next few years," he said.

Templeman said Debenhams would continue to press "self-help levers," such as driving up the proportion of higher margin own bought products in its sales mix to offset the impact of input cost pressures, particularly cotton prices and Asian wage inflation.

But he said he expected clothing prices across the high street to rise 6 to 8 percent this year as input cost inflation was passed on.

The firm would also invest in new store openings and store refits, as well as growth online and overseas.

Last week a survey showed retail sales in February fell at their fastest annual pace in ten months, while Home Retail, owner of Argos and Homebase, issued a profit warning.