Department store group Debenhams said it was well placed to cope with a worsening consumer market by focusing on growing profit margins rather than chasing sales.
The firm, which trades from 166 stores in Britain, Ireland and Denmark and about 60 franchised outlets in 23 countries, forecast first half pretax profit in line with a market consensus of about £128 million but said trading across the UK 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 said.
"We believe that our focus on driving cash margin rather than just chasing sales will continue to benefit our profit and loss over the next few years."
Mr 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 per cent 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.
"Debenhams does have more self-help than peers, but it also has more operational leverage," said Simon Irwin, an analyst at Liberum Capital.
Debenhams said sales at stores open more than a year fell 1.5 per cent excluding VAT in the 26 weeks to February 26th. That was in line with analysts' forecasts of down 1 to 2 per cent, according to a Reuters poll, and compared with a fall of 1.3 per cent in the 19 weeks to January 8th.
Gross transaction value over the period increased 3.2 per cent, with gross margin up but not quantified.
With Debenhams' net debt seen at £350 million at the end of its first half, a year-on-year fall of £160 million, Mr Templeman forecast year end net debt ahead of the current market consensus.
Analysts said this bodes well for the resumption of dividend payments.
Reuters
