Broker Singer met Debenhams managment last week and reiterated its buy advice afterwards.
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Singer analyst Matthew McEachran said the meeting had reaffirmed the department group’s strategic ambitions. He said the retailer’s recent de-rating had resulted in a valuation anomaly.
He said: “The business is increasingly differentiating itself within a crowded high street and plans to enhance the product offering.”
Debenhams has underperformed the All-Share index by 12% over a two-month period but McEachran said the retailer is too lowly rated, “despite growth assumptions seemingly being well founded and not wholly UK trading-dependent”.
He said: “With low gearing and strong free cash flow, Debenhams will reintroduce a dividend this year and has the flexibility to accelerate store refits and consider enhancing earnings per share.”