UK's Debenhams says don't count on consumer recovery in 2014

* 2012-13 pretax profit 154 mln stg, down 2.7 pct

* CEO says there is "disconnect" between economic data and reality

* Says market is highly competitive

* Shares drop up to 8.8 pct (Adds detail on costs, analyst comment, updates shares)

By James Davey

LONDON, Oct (KOSDAQ: 039200.KQ - news) 24 (Reuters) - Debenhams (Other OTC: DBHSY - news) , Britain's second-largest department store retailer by sales, is not counting on the pace of any consumer recovery picking up significantly in 2014, it cautioned on Thursday as it reported a 2.7 percent fall in full-year profit.

"There is a clear disconnect between some of the more positive economic data and how customers are actually feeling in reality," chief executive Michael Sharp said, adding a consumer recovery was "probably further away than people might have previously liked to expect."

His outlook, along with fears that Britain's unseasonably warm autumn has not helped Debenhams' sales and concerns over cost growth, sent shares in the firm down as much as 8.8 percent.

Analysts at N+1 Singer cut their 2013-14 pretax profit forecast by 4 percent to 155 million pounds ($251 million), after pencilling in cost growth of 4.5 percent - 1 percent ahead of their previous estimate.

They highlighted incremental costs of 7.5 million pounds for a new head office and a worsening of the costs to generate international online sales.

Though data and surveys have indicated the outlook is improving for UK consumer spending, retailers are generally still cautious as inflation continues to outpace wage rises - Tesco (Other OTC: TSCDF - news) and Sainsbury (LSE: SBRY.L - news) 's have recently highlighted that consumers' disposable income is still falling .

Sharp said he regularly met shoppers: "They talk about the pressure of energy costs, food inflation, the cost of car parking and they are all very clear that all those component parts are running ahead of wage inflation."

The 200-year-old group, which trades out of 236 stores across 28 countries, made a pretax profit of 154 million pounds ($248.98 million) in the year to Aug. 31 - in line with analyst expectations but down from 158.3 million pounds made in the 2011-12 year.

Analyst forecasts had been cut after a profit warning in March that was blamed on January snow. The firm then endured wet spring weather before getting a boost to sales from a summer heatwave.

Now a mild autumn looks set to cause more problems.

"The hot weather has sent Debenhams' autumn/winter range into a tailspin. It's nearing the end of October and I have just seen a promotion offering 25 percent off a coat," said James McGregor, director of retail consultants, Retail Remedy.

HIGHLY COMPETITIVE

Full-year sales, announced last month, rose 2.5 percent to 2.78 billion pounds, with sales at stores open over a year up 2.0 percent and gross margin flat.

Debenhams, behind employee-owned John Lewis by annual sales, is modernising stores - including a 25 million pounds refurbishment of its flagship on London's Oxford Street that it hopes will attract new brands and partners - as well as investing in new product and online and expanding its brand internationally as it seeks to counter subdued consumer confidence with market share gains.

The firm's share in clothing, footwear and accessories rose by 30 basis points in the 12 weeks to Aug. 4, according to data from Kantar Worldpanel.

Though Sharp expects the market to remain highly competitive in the run-up to Christmas he indicated that Debenhams was not being hurt by the efforts of Marks & Spencer (Other OTC: MAKSF - news) , Britain's biggest clothing retailer, to revive its womenswear business.

"We continue to grow market share in womenswear and I think that's all the evidence you need to demonstrate that we're clearly getting lots of things right for our customer," he said.

Shares in Debenhams, which is paying a dividend of 3.4 pence, up from 3.3 pence last year, were down 8.7 pence at 102 pence at 1414 GMT, valuing the business at 1.26 billion pounds. ($1 = 0.6185 British pounds) (Editing by Sophie Walker and David Cowell)