UPDATE 2-Debenhams suffers as Britons buy cars and holidays

* Q3 like-for-like sales down 1.6 pct

* Says trading conditions challenging and uncertain

* Still expects pretax profit in analysts' range

* Shares down 5 pct (Adds CEO comments, analyst reaction, shares)

By Paul Sandle

LONDON, June 22 (Reuters) - Debenhams said Britonswere spending their cash on holidays and cars rather thanclothes after the retailer reported a fall in third-quarterlike-for-like sales that sent its shares down as much as 6percent.

Outgoing chief executive Michael Sharp said the market had"undoubtedly been tough" after Debenhams reported a 0.2 percentfall in sales at stores open more than a year. Stripping out thecurrency impact gave a worse-than-expected 1.6 percent drop.

"More spend is clearly going into things like holidays andpeople buying new cars, so we've got that as a backdrop," hetold reporters on Wednesday.

"And clearly, although it is impossible to tell howsignificant, the uncertainty as a result of the referendum hasadded to the whole unpredictability."

British new cars sales hit a record high in 2015 and theyhave continued to rise, with new car registrations up 4.1percent in the first five months of the year.

Sharp said Debenhams had a very strong season for swimwearand luggage, for shoppers going on holiday, but other seasonalclothing sales, especially for women, had been poor.

However, he said Debenhams, second to John Lewis byannual revenue, had the right strategy in place to counterchanging shopping habits and he still expected profit for theyear to be within the range of market forecasts.

SHARES SLIDE

Shares in the department stores group fell as much as 6percent to 69.6 pence before recovering slightly. Analysts atCiti said the market consensus for profit was likely to comedown by 2-3 percent following the update.

Analysts on average had expected pretax profit of 119million pounds ($174.8 million), according to Reuters data.

Associated British Foods, the owner of Primark, andother rivals Marks & Spencer and Next weredragged lower by Debenhams' update, falling by 3.2 percent, 1.2percent and 0.7 percent respectively.

BHS, another familiar fascia on UK high streets, is beingwound down, administrators said earlier this month.

The update for the 15 weeks to June 11 was the last underSharp, who steps down on Friday after five years. Last month,Amazon executive Sergio Bucher was named as hisreplacement

Under Sharp's leadership, Debenhams built its non-clothingcategories, such as beauty, and reduced its reliance ondiscounting. It also added concessions in under-used storespace, built up its online service and expanded abroad.

New arrivals would include Claire's Accessories in 15stores, he said, and more restaurants to serve growing demandfor eating out while shopping.

There had been some targeted discounting in areas such aswomen's clothing in response in market conditions, he said, butnot at a higher level than a year ago.

However, the company said its gross margin was now expectedto be to flat versus a previous forecast of flat to up 0.5percentage points.

($1 = 0.6809 pounds) (Editing by Louise Heavens and David Clarke)