Department store group Debenhams expects headline profit before tax and exceptional items to hit £150m in the year to August 28, ahead of market expectations.

KBC Peel Hunt analyst John Stevenson said that gross margin gains of 100 basis points during the year were better than forecast.

While like-for-like sales came in flat for the year, the department store chain reported a recovery in like-for-likes in the last 10 weeks.

Stevenson said: “With the disruption for space changes to own-brand now annualising (an estimated like-for-like negative of 1.5%), the business is delivering positive momentum towards peak trading, unlike the majority of retailers, we believe.”

However, he forecast that like-for-like sales would drop 1% in the next calendar year, due to lower levels of disposable income available to consumers.

UBS analyst Adam Cochrane said that in its full-year figures for 2011 Debenhams would benefit from factors including last year’s acquisition of the Danish department store business Magasin du Nord and lower interest costs on refinancing.