DEBENHAMS PLC 
LONDON (Reuters) - Debenhams (>> Debenhams Plc), Britain's No. 2 department store chain, posted a more than 20 percent drop in annual profit on Thursday and said it was "cautious" about the future, as the spending power of British consumers remains under pressure.
Debenhams results for the 12 months ending in August were hit by a disastrous start to the financial year, when warm autumn and winter weather dented sales in the run-up to last Christmas. It said on Thursday that its performance improved in the second half, helped by its strategy of cutting back on promotions and targeting more full-price sales.
"Whilst this has been a challenging year for Debenhams, the brand is strong and our improved second half performance gives us confidence that we are ready for the key Christmas period and can deliver sustainable growth over the longer term," Chief Executive Michael Sharp said in a statement.
Debenhams, which trails market leader John Lewis [JLP.UL] by annual sales, has endured a tough 12 months with its shares tumbling 44 percent after it issued its second profit warning in less than a year last December.
The company, which has 245 stores in 28 countries, on Thursday reported underlying pretax profit of 110.3 million pounds in the 12 months ended Aug. 30, in line with analysts' average forecast of 110 million pounds, according to Reuters data.
Looking to its new financial year, Debenhams forecast that it could boost profitability, growing its gross margin by 10 to 40 basis points, as it continues to cut back on promotions, focuses on making its online business more competitive and rearranges its shops.
Earlier this year the firm identified about 10 percent of space in its around 160 UK stores as "underperforming". Sporting goods retailer Sports Direct (>> Sports Direct International Plc), which owns a small stake in Debenhams, and Whitbread- (>> Whitbread plc) owned coffee shop Costa are trialing concessions in Debenhams stores.
Debenhams said there were "encouraging" early signs from the trials.
Shares in Debenhams climbed 1.8 percent at the open on Thursday.
(Reporting by Sarah Young, Editing by Paul Sandle and Clara Ferreira Marques)
