Profitable Debenhams threatens festive price war

The new chief executive of Debenhams has vowed to keep up the price pressure on its rivals this Christmas after the department store chain said its full-year profits would be ahead of market expectations.

Michael Sharp, the retailer's former deputy chief executive, who took the helm this month, said: "Whatever we need to do in the run-up to Christmas to remain competitive and to protect the market gains we have seen, we will do."

But Debenhams' gross margin will be "slightly down" for the year just ended, which Mr Sharp blamed on "pricing pressure" on the high street.

Over the 52 weeks to 27 August, the retailer's like-for-like sales, excluding VAT, fell by 0.3 per cent, but they inched back into positive territory over the last eight weeks.

This was driven by a strong end to its summer clearance sale, while Debenhams raised average selling prices by 5 per cent over the year. It now expects pre-tax profits over the 53 weeks to 3 September to be ahead of consensus forecasts of £158m, with City analysts pencilling in between £160m and £165m.