In a trading update for the 17 weeks to December 30, the firm said pre-tax profit would “probably” fall to between £55 million and £65 million in the current fiscal year should current “volatile, competitive market conditions” persist.
Analysts were expecting the chain to reach around £83m, against a 2016 performance of around £95m.
The warning was driven by falling UK like-for-like sales, which exclude store openings and closures, which dropped 2.6% during the period. Overall group sales down 1.8 per cent.
Debenhams said it was accelerating its turnaround strategy to produce around another £10m in cost savings earmarked for this financial year.
Sergio Bucher, chief executive of Debenhams, said: “The market has been challenging and particularly promotional in some of our key seasonal categories and we have responded in order to remain competitive for our customers, which has impacted our profit performance.
“Nevertheless, we are seeing positive early signs from the changes we have made as part of our Debenhams Redesigned strategy. The market dynamics we have seen have reinforced our view that we need to move even faster to implement the cultural and organisational changes needed to ensure Debenhams is in the best possible shape for today’s fast-changing retail environment.
“I am grateful to my colleagues for their hard work and I am proud of the service improvements we have delivered, whilst maintaining a rapid pace of change throughout the organisation, including strong new hires to important management roles. I look forward to updating on progress with our strategy in April.”