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Department store Debenhams has reported a 16 per cent drop in profits as high street spending dwindles.

Profit before tax fell to £110.1 million as like-for-like sales dropped 0.9 per cent.

Dividends have been halved as a result.

However, the firm was able to put a brave face on the figures saying its market share of clothing was up 0.3 per cent and it saw strong performance from Designers at Debenhams– with sales of the range up eight per cent to £387 million.

However, in the home division the store admitted "there is still some work to be done".

Debenhams Direct recorded a 60.8 per cent increase in sales.

The firm blamed the fall on the financial crisis and the press coverage of the crunch.

A statement read: "The first few weeks of the new financial year have been characterised by unprecedented turmoil in financial markets which has attracted massive media interest and in turn has heightened concerns of customers about their own financial security.

"This has undoubtedly had a negative impact on the retail sector."

Rob Templeman, chief executive of Debenhams, said: "In what has been a difficult trading environment, we were pleased to have been able to deliver gross transaction value growth of 1.3 per cent.

"In 2009 we will drive the business forward by continuing to focus on product design, quality and value and on the important differentiation provided by our exclusive Designers at Debenhams ranges. At the same time we will invest prudently in higher returning projects such as new stores."