Debenhams shares lifted by spring sales rebound

By Dan Lalor and Mark Potter

LONDON (Reuters) - Department stores group Debenhams (DEB.L) said same-store sales had risen this spring, reassuring investors that tough trading conditions will not damage its ability to pay down debt, and lifting its shares.

Debenhams shares rose 16 percent to 49 pence, a two-day high in early trading. Its stock had fallen around a third in value in the past month on fears it might struggle to pay off its 1 billion pounds of debt.

"In light of the tough trading environment across the whole UK retail sector, we are pleased with customer response to our new ranges and, as a result, our improving sales performance for the period," Chief Executive Rob Templeman said.

Templeman said Debenhams was taking market share from rivals and that net debt at the end of its financial year would be in line with analysts' expectations. He forecast further market share gains over the summer.

Debenhams said like-for-like sales rose 1.0 percent in the 10 weeks to June 21, a turnaround from the previous 32 weeks when like-for-like sales fell 1.0 percent. Gross margin guidance for the year was left unchanged.

"The numbers speak for themselves," Templeman told reporters, adding the company had brought forward its trading update because of inaccurate market rumours, one of which had suggested the group's like-for-like sales were down 9 percent.

Kaupthing analysts said "trading fears (were) completely misplaced. Debenhams's IMS (interim management statement) has been brought forward from July 3. But unlike most others in the sector this isn't a profit warning but an extremely solid update, which is ahead of expectations".

Kaupthing has a "buy" rating on Debenhams stock and a 92 pence target.