UPDATE 1-Debenhams to trial Sports Direct and Costa concessions

Fri Jun 20, 2014 4:10am EDT

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LONDON, June 20 (Reuters) - Britain's No. 2 department store chain Debenhams is to trial Sports Direct and Costa coffee concessions in its stores as it seeks to get higher returns by making better use of its space.

Debenhams, which gave an update on third-quarter trading on Friday, said two stores will get Sports Direct sporting goods concessions in August, with potentially more to follow by Christmas. Costa coffee, owned by Whitbread, will launch in six stores this month and in July.

"We'll do those trials and see where we go from there," Chief Executive Michael Sharp told reporters.

"There are also some other retail brands that we continue to talk to," he said, declining to give any names.

Sports Direct bought a 4.6 percent stake in Debenhams in January. It swiftly sold it and took out an option that could leave it with a larger stake.

Debenhams has endured a tough 12 months, issuing its second profit warning in less than a year in December and losing its finance chief after a long-held strategy of pushing promotions failed to boost its crucial Christmas sales.

In April, the 200-year-old firm reported first-half profit down by a quarter and Sharp said he would reduce promotions, make its online business more competitive with more delivery options and redeploy excess store space.

The firm has identified about 10 percent of space in its 158 UK stores as underperforming.

"The way to make that space more efficient is to add more choice to it," said Sharp.

He said customer research had shown they wanted to see more sportswear in Debenhams stores. Sportswear currently represents less than 1 percent of the firm's total sales.

Debenhams, which trails John Lewis in annual sales, said sales at stores open over a year rose 0.7 percent in the 14 weeks to June 7 as it shifted its strategy to have fewer days on promotion so it can deliver a higher level of full-price sales.

This year its summer sale is starting two weeks later than last year, on June 26.

Debenhams also said on Friday it was starting a debt investor roadshow in relation to a 200 million pound ($341 million) seven-year bond issue.

Shares in the firm, down 29 percent over the last nine months, were up 0.8 percent at 72.8 pence at 0755 GMT, valuing the business at 891 million pounds. ($1 = 0.5864 British Pounds) (Reporting by James Davey; Editing by Erica Billingham)

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