ANNUAL profits at Debenhams have fallen 24.8 per cent caused by disastrous Christmas trading.

The department store chain, which has 245 shops in 28 countries, said it was now selling more products at full price after overhauling its calendar of promotions, with its summer sale starting two weeks later this year.

Operating profits in the six months to August 30 rose nearly 3 per cent but the turnaround was not enough prevent the retailer reporting a drop in bottom-line profits of 24 per cent to £105.8m for the financial year.

Admitting recently that 10 per cent of its UK space was under-performing, the chain has invited Sports Direct, Mothercare, Monsoon and Costa into its stores as part of a trial that could lead to the arrival of a number of other leading brands.

It said there were encouraging early signs from the trial, which will be extended to further stores before Christmas.

The company has also launched new delivery options in time for the festive period, with next-day click and collect and a 10pm cut-off for next-day delivery.

Chief executive Michael Sharp said the improved second half performance gave the company confidence but warned that conditions remain tough.

He added: "Customers tell us that although they are encouraged by economic improvements this has yet to translate into higher disposable income and the market remains tough. We therefore remain cautious about the outlook and will continue to plan prudently."

The company had 160 stores trading from 11.2 million sq ft at the year-end after four new shops opened at Cheshire Oaks, Haverfordwest, Hereford and Leamington Spa. It plans to open 12 new branches, including sites in Borehamwood, Hertforshire and Scunthorpe in 2015.

The company recently shelved plans to open a flagship store in Darlington in the building occupied by The Northern Echo and its sister newspapers.