Shares in Debenhams, which trades from 169 stores in Britain, Ireland and Denmark, and 64 franchised outlets in 25 countries, rose 2.5 percent after it also said on Tuesday it expected to make further progress in its 2011/12 year.

“In this sort of market there are inevitably winners and losers, and I believe Debenhams is well-positioned to continue to be one of the winners,” chief executive Michael Sharp, who succeeded Rob Templeman earlier this month, told reporters.

Debenhams, ranked second after employee-owned department store chain John Lewis, said while its gross margin for the 53 weeks to Sept. 3 would be flat to slightly down versus 2009/10, underlying pretax profit should be ahead of a market forecast for about 158 million pounds ($247 million).

Finance director Chris Woodhouse said he expected a new consensus to settle at about 164 million pounds.

Year-end debt would be about 385 million pounds, down 130 million since the start of the year and compared with previous guidance for about 400 million.

Debenhams’ strategy is to drive profits by investing some of its gross margin into pushing top-line sales.

Sharp said this strategy could change in the key Christmas trading season.

“Depending upon how we find the market during the course of the autumn/winter season and where we are on pricing versus the competition and the strength of consumer confidence, we will react accordingly.”

In common with rivals, such as Next, he expects selling price inflation to peak during the autumn/winter season, with like-for-like prices up about 9-10 percent, before easing in spring/summer 2012 as input cost pressures, particularly cotton, moderate.

Debenhams is also targeting growth from Internet initiatives and overseas as well as from new store openings and store refits, including a redevelopment of its flagship store on Oxford Street that will add 10 percent more space.

It said sales at stores open over a year were up 0.4 percent in the nine weeks to Aug. 27 but down 0.3 percent over the full year. Total full-year sales were up 2.9 percent.

“Although there have been many stories of extremely tough trading in July and August elsewhere in the sector, for Debenhams, trading in these months has been good,” said Sharp, highlighting an improving trend and market share gains in womenswear, menswear, childrenswear and health and beauty.

Riots in English cities and towns in August did not have a material impact on business.

Shares in Debenhams, which returned to the stock market at 195 pence in 2006 after 2-1/2 years in private equity hands, had lost 14 percent of their value over the last three months.

“Debenhams was boosted by a consumer increasingly reliant on activity as a ‘call to action,’ which suits Debenhams’ promotional-led style,” said Numis analyst Andrew Wade.

Consumers’ purchasing power is being squeezed by higher prices, muted wage growth, a lack of credit, job insecurity, a stagnant housing market, government austerity measures and fears of eventual interest rate rises.

A survey on Monday found Britons digging into their savings and running up debt to finance spending, auguring ill for consumption and suggesting domestic demand would remain a drag on the fragile economy.

“We have seen nothing to suggest that the economic situation is going to improve, so we are laying out our stall assuming that it is going to continue to be tough,” said Sharp.