Debenhams first half profit falls by a quarter

LONDON (Reuters) - Debenhams, Britain's second largest department store group, said it was confident improvements it was making to its business would eventually deliver for investors, after posting an as-expected 25 percent fall in first-half profit.

The company has endured a tough 12 months, issuing its second profit warning in less than a year in December and losing its finance chief after its much criticised strategy of slashing prices failed to boost its crucial Christmas sales.

The hit to margins, which spread into January and February as the firm kept prices down to shift stock, meant pretax profit for the 26 weeks to March 1 fell 24.5 percent to 85.2 million pounds ($142.58 million) from 112.8 million a year ago.

That was in line with guidance given in its December 31 warning but well below the 112 million pounds analysts had forecast prior to the warning.

Debenhams Chief Executive Michael Sharp said it believed its focus on building a more competitive multi-channel offer and improving operations would herald an improvement.

"Whilst we remain cautious about the strength of the UK consumer recovery, I am confident the changes we are putting in place will provide a better customer experience and, over time, stronger results for our shareholders," Sharp said.

While many UK retailers have resorted to fierce promotional activity to win shoppers some analysts believe Debenhams has struggled more than most due to its weaker online offering, reliance on discount offers and less popular own-brand ranges.

Despite having 158 UK stores against the 41 run by John Lewis, Debenhams trails the latter in both sales and profits.

Retailers across Europe have also been struggling as subdued wage growth and austerity measures squeeze shoppers' disposable income. Most have responded with price cuts.

At Debenhams, first-half group sales grew 1.7 percent to 1.3 billion pounds, but lower than expected sales in the UK and a 100 basis points decline in gross margin due to a rise in discounts dragged down profit.

Shares in Debenhams closed at 77.55 pence on Monday, down 28 percent on six months ago, valuing the business at 971 million pounds.

(Reporting by Neil Maidment; editing by Kate Holton)