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Department store chain Debenhams’ shares have sunk 20% after it warned that annual profits would be lower than expected because of disappointing trading over the key Christmas period.

The retailer said underlying pre-tax profits were now likely to be between £55m and £65m this year. Analysts had been expecting profits to be about £83m.

Like-for-like sales in the UK fell 2.6% in the 17 weeks to 30 December amid a “volatile and competitive” market.

Debenhams said trading had improved over the six-week Christmas period thanks to discounting, with like-for-like sales up 1.2% during that time, but the first week of the post-Christmas sale was worse than expected.

“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,” said Debenhams chief executive Sergio Bucher.

Winners and losers are emerging with the likes of Next and Aldi performing excellently while Debenhams suffers.

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