October 26, 2017 / 10:39 AM / a year ago

UPDATE 1-UK department store Debenhams wants customers to work out, eat out and shop

* Full-year profit falls 17 pct

* Says trading in Britain volatile

* Will trial gyms in three stores

* Shares flat (Adds CEO comments, analyst reaction, shares)

By Paul Sandle

LONDON, Oct 26 (Reuters) - Customers at UK department store Debenhams will be able to exercise as well as shop and eat next year when the struggling chain opens gyms in its shops.

It is part of a drive to once again become an appealing destination on the high street.

Chief Executive Sergio Bucher wants to return Britain’s second biggest department stores group to profitable growth by improving its mobile offer, revamping shops and focusing more on beauty, accessories and food.

Results on Thursday showed the challenge the former Amazon executive faces, with adjusted profit falling 17 percent to 95.2 million pounds ($126 million) in the year to Sept. 2.

Like-for-like sales grew 2.0 percent, the company said, with a flat outcome in Britain.

“We a reporting a solid set of results, in line with expectations, against a tougher UK trading environment in the second half,” Bucher said.

The market would remain volatile in the run-up to Christmas, he said, but it was well prepared for its peak trading period in terms of its products and services.

“Christmas plays to our key strengths,” he said.

Debenhams, second to John Lewis in the UK department store sector, said a 5 percent rise in beauty sales and a 8 percent rise in food helped mitigate a 0.5 percent decline in clothing.

Boucher said the clothing decline was broadly in line with the market.

Consumers, who have seen their spending power squeezed by low growth in wages, have prioritized spending on experiences like dining out rather than on fashion and footwear.

Boucher has turned to partners, such as restaurant chains The Real Greek and Nandos, to speed up change at Debenhams.

It is partnering “friendly fitness” operator Sweat! to open three fitness facilities initially.

“We are really pleased with the opportunity with Sweat, and they will be opening in the new year, but we are still finalising exactly which stores,” said Finance Director Matt Smith.

Shares in Debenhams, which fell to an eight-year low of 39 pence in September, were trading flat at 46 pence at 0937 GMT.

Analysts at Investec, who rate Debenhams a “sell”, forecast another fall in profit this year, to 85.6 million pounds.

“Wider structural pressures from the online shift may mean strategy implementation needs to speed up in our view,” they said. “Without this, it is hard to see profit progress in the next three years as the basic are fixed.”

$1 = 0.7557 pounds Reportint by Paul Sandle Editing by Kate Holton/Jeremy Gaunt

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