Debenhams profit in line

Department stores group Debenhams said first-half sales fell more than expected and it sees the retail environment remaining tough, but its shares rose on relief profit for the period would meet forecast.

The retailer, which runs around 145 stores across the UK and Ireland, said like-for-like sales fell 0.7 per cent in the six months to March 1, compared with a sales drop of around 0.5 per cent forecast by four analysts polled by Reuters.

Debenhams, which also has around 40 international franchises in 16 countries outside Britain and Ireland, had said in January that like-for-like sales were flat in the first 18 weeks of its financial year, reflecting poor market conditions. Underlying sales over the key Christmas period - the four weeks to January 5 - rose by 2.2 per cent.

"Following a good performance over Christmas and the January sale, market conditions were tough through the remainder of January and February," chief executive officer Rob Templeman said in the trading update yesterday.

"The macro economic climate leads us to expect the retail environment to remain challenging," he said, adding first-half profit would be in line with market forecasts.

Britain's department store owners have struggled as indebted shoppers cut back on spending amid higher energy and food bills and a cooling housing market.

Retail bellwether Marks & Spencer Group reported its worst quarterly performance in two years in January, when it warned that the pain for retailers could extend into next year.

"Current trading though weak could have been a lot worse, and the market will be relieved that first half profit is expected to be in line with consensus," Panmure Gordon analyst Philip Dorgan said in a note.

"We believe the stock is oversold, and that the investment in the store base will pay off as the market picks up," he said, retaining a 'Buy' rating on the stock and 80p price target.