UPDATE 2-Next enters British beauty contest in former Debenhams stores

* Next leases space in five former Debenhams stores

* Wants to be a 'new force' in beauty

* Next beauty halls will complement online service

* Shares up 3.2%
(Adds detail, updates shares)

LONDON, May 7 (Reuters) - British clothes retailer Next
will open five standalone beauty halls in former
Debenhams stores across the country as a first step in its
ambition to become a new force in beauty retailing, the company
said on Thursday.

Next will be taking on Boots, Superdrug, John Lewis and
Debenhams itself in a health and beauty market worth 22 billion
pounds ($27 billion) in 2018 and forecast to grow nearly 17% in
the five years to 2023, according to researcher GlobalData.

Despite the coronavirus lockdown and huge recession on the
horizon, Next snapped up the space in five shopping malls owned
by Hammerson, seeing an opportunity for growth by
extending its online beauty business to physical stores.

The move by Next is a sign that retailers with stronger
finances are taking advantage of opportunities as weaker rivals
battle to survive the pandemic.

Last month, Next sold property, suspended share buybacks and
dividends and delivered higher cost savings to shore up its
finances after its first-quarter sales plunged 41%.

Shares in Next, down 32% so far this year, were up 3.2% at
1323 GMT on Thursday, while Hammerson was up 0.9%. The mall
operator's shares have fallen more than 80% since December.

Struggling department store chain Debenhams, which is in
administration, said on Wednesday it would not reopen the five
stores leased from Hammerson after failing to agree rent terms.

All Debenhams and Next stores in Britain are currently
closed as part of the country's lockdown to reduce the spread of
the coronavirus.

'BEAUTY HALL'

Next said it had signed new flexible leases with Hammerson
for space in the flagship sites at Bullring & Grand Central in
Birmingham, The Oracle in Reading, Highcross in Leicester,
Silverburn in Glasgow and Centrale in Croydon.

Next will brand the space "The Beauty Hall from NEXT".

"This is an exciting opportunity to work with existing and
new beauty brand partners to create a new force in beauty
retailing," said Next Chief Executive Simon Wolfson.

Next said it aimed to create a premium retail environment
for beauty to complement its existing online beauty business,
which sells over 200 brands, including Estee Lauder, Clinique,
Benefit, Origins and Elemis.

Next joined forces with Fabled by Marie Claire to launch an
online beauty business in 2018 and then bought Fabled from Ocado
last year.

Next does give a breakdown of its revenue. However, beauty
would have made a small contribution to the company's overall
2019-20 turnover of 4.4 billion pounds.

Next also said it was in talks about adding a small number
of further sites.

It said it was likely that many of the former Debenhams'
beauty staff would be employed by Next.

"This is another example of how we are repurposing
department store space," said Hammerson Chief Executive David
Atkins.

Hammerson, which saw a 400 million pound deal to sell seven
UK retail parks to private equity firm Orion collapse on
Wednesday, said it would pursue opportunities to repurpose the
other floors of the former Debenhams stores, as it continues to
reduce the amount of department chain space in its portfolio.
($1 = 0.8109 pounds)
(Reporting by James Davey; Editing by Jan Harvey and David
Clarke)