The Christmas trading update from was a pleasant surprise, but broker KBC Peel Hunt still has concerns about the department store chain's debt position.
"We believe the company is likely to seek to raise funds in due course, a point which keeps us somewhat ambivalent to the equity at this stage, particularly given the high financial and operating leverage for the coming year," KBC analyst John Stevenson said.
KBC has initiated coverage on Debenhams with a "hold" recommendation.
The broker believes that a dose of reality is now being applied to profit forecasts for the retail sector.
"Our unweighted, annualised PBT [profit before tax] expectations for stocks in our [retail] universe are down 19% for 2008E calendar year and down a further 20% for 2009E calendar year," KBC revealed.
