Debenhams, Britain's second largest department store group, showed its resilience to tough conditions across the retail sector by posting an improving sales performance in its first half.

Debenhams, with its wide range of products from lipstick to hand bags, has fared better than most.

The strategy of the firm, ranked second in the UK after employee-owned department store chain John Lewis, is to drive profits by investing some of its gross margin, through price cuts and promotions, into pushing sales.

Shares in Debenhams, which trades from 170 stores in the UK, Ireland and Denmark and 66 franchise stores in 25 international markets, rose nearly 2 percent on Tuesday after it said sales at stores open more than a year rose 0.3 percent, excluding VAT sales tax, in the 26 weeks to March 3.

That was ahead of analysts' average forecast of a fall of 0.2 percent, according to a company poll, and flat sales in the 18 weeks to January 7.

The firm said it had a strong finish to the half with like-for-like sales up 2.4 percent in the last eight weeks.

Trading in the last eight weeks of the half held up well, helped by a successful winter sale as well as an encouraging start to the new season, it said.

The company's shares, which have increased by a third over the last three months, were up 1.4 pence at 77.2 pence at 0817 GMT, valuing the business at about 995 million pounds ($1.58 billion).

This performance stems from having a differentiated strategy and tight supply chain, stock, and cost management. These credentials should continue to help the rating in 2012, said Singer Capital Markets analyst Matthew McEachran.

British retailers are mostly struggling as disposable incomes are squeezed by rising prices, muted wages growth and government austerity measures, and as shoppers fret about job security, a shaky housing market and the euro zone debt crisis.

The UK government and the Bank of England are banking on a rise in consumption later this year as inflation is set to fall.

While a March 6 industry survey said UK retail sales remained sluggish in February, latest official data showed they rose in January. That data and a string of promising business surveys have raised hopes of recovery in 2012.

Whilst it is prudent to remain cautious about the health of the wider economy and the impact this may have on consumer behaviour in the short-term, we remain comfortable with the outlook for the full year, said Chief Executive Michael Sharp.

Over the medium-term, we are confident of the benefits that our strategy will bring to Debenhams.

Prior to Tuesday's update analysts were forecasting a consensus first half underlying pre-tax profit of 124 million pounds.

Debenhams returned to the stock market at 195 pence in 2006 after two-and-a-half years in private equity hands. ($1 = 0.6292 British pounds)

(Reporting by James Davey.; Editing by Kate Holton and Jane Merriman)