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High street cheered by Debenhams and Arcadia

Sir Philip Green's Topshop, Topman and Miss Selfridge enjoy record year of profits

Two of Britain's biggest retail groups posted similar increases in pre-tax profits yesterday, lifting hopes for the Christmas trading period.

Sir Philip Green's Arcadia – which operates the Topshop, Topman, Miss Selfridge, Wallis, Evans, Burton and Dorothy Perkins chains – said its pre-tax profits for the year to 29 August rose by 13 per cent to £213.6m. Meanwhile, Debenhams' pre-tax profits, before exceptionals, were up by 13.7 per cent to £125.2m over the same period.

The profits increase at Arcadia was driven by record sales and earnings at its young fashion chains Topshop, Topman and Miss Selfridge. But Sir Philip – who also owns Bhs – said that Wallis, Evans, Burton and Dorothy Perkins were "all finding it tougher in the mid-market".

He revealed plans to launch Topshop, which currently trades in 30 countries, in China, Italy and France, with Paris a target city, within a year. The Topshop branch which opened in New York in April was "doing well" and the company would open more shops in the US, he added.

For the first seven weeks of its new financial year, Arcadia's like-for-like sales – stripping out the impact of new store openings – rose by 2.3 per cent.

Meanwhile, Debenhams cited the strong performance of its own-bought ranges, particularly its Designers at Debenhams, and tight cost controls for the uplift in its pre-tax profits at the department stores. Its designer ranges, including John Rocha and Jasper Conran, drove an uplift of 70 basis points in gross margin over the year.

Stock market 'way ahead of events', says tycoon

Sir Philip Green, the billionaire behind the Arcadia and Bhs retail groups, has warned that the buoyant stock market is out of kilter with economic reality and that 2010 will be another tough year. He said: "I think the [stock] markets are way ahead of events. I think it's going to be hard work ahead, a long slog." The tycoon added: "The VAT increase, unemployment and a general election will all impact upon the market." The FTSE 100 closed at 5,270.36 yesterday and has soared since March.