Debenhams says own brand strategy paying off

"As a result of higher sales and gross margin, EBITDA and profit before tax for the first half are both expected to be higher than last year and in line with market forecasts," the firm said on Tuesday.

Debenhams, with nearly 160 stores in Britain and Ireland and more than 50 franchised outlets overseas, is shifting from low-margin concessions by devoting more space to own-brand products, particularly its Designers at Debenhams ranges which include Jasper Conran, Betty Jackson and Julien Macdonald.

As own-brand products are lower priced than those sold through concessions, sales values are impacted. However, own-brand products are higher margin, so profitability improves.

Shares in Debenhams, which have nearly doubled over the past year as worries eased about its debt, were down 0.4 percent at 70.7 pence at 10:15 a.m., valuing the business at about 910 million pounds (927 million pounds). The DJ Stoxx European retail index <.SXRP> gained 0.4 percent.

"Debenhams needs to re-establish the performance advantage it held over its peers in 2009 for the shares to make real headway," analysts at JP Morgan Cazenove said in a note.

Debenhams posted a 0.3 percent rise in sales at stores open over a year for the 26 weeks to February 27 and said it was winning market share. That outcome compared with analysts' consensus forecast of flat like-for-like sales, according to a company poll, and a rise of 0.1 percent for the 18 weeks to January 2.

Gross transaction value increased 1.7 percent, compared with a forecast for 1.5 percent.

Chief Executive Rob Templeman told reporters gross margin for the period was "north of 100 basis points" higher.

He said the second-half would benefit from the introduction of 150,000 square feet of space occupied by new Principles ranges designed by Ben de Lisi and H! by Henry Holland.