UPDATE 1-Debenhams warns on profit after price cuts fail to lure shoppers

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LONDON, Jan 4 (Reuters) - British retailer Debenhams plc downgraded its profit forecast on Thursday after it slashed prices to drive sales in the run up to Christmas and cut them again after shoppers failed to turn out for its clearance sale.

The department store group said its British like-for-like sales at constant currency fell 2.6 percent in the 17 weeks to 30 December, reflecting a volatile and competitive market in the autumn and a disappointing first week of its post-Christmas sale.

"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," Chief Executive Sergio Bucher said.

It managed to increase like-for-like sales by 1.2 percent in the six weeks to Christmas after it cut the price of gifts, but at a heavy cost to its margins.

It said its gross margin for the first half would be down by about 150 basis points, far below its target of a 25 basis point fall for the year to September 2018.

It said its profit before tax for the year was now likely to be in the range of 55 million to 65 million pounds ($88 million).

Debenhams reported underlying profit before tax of 95 million pounds last year and analysts had been expecting a figure of 83 million pounds in 2018, according to Reuters data.

($1 = 0.7399 pounds) (Reporting by Paul Sandle; editing by Kate Holton)