The UK's second largest department store chain reported pre-tax profits of Â£87.2m in the year to 30 August.  Like-for-like sales were up 1%.
Online sales increased by 17.6% to Â£430.7m, accounting for 15.3% of the total in 2014 and up from 13.2% in the previous year.
Chief executive Michael Sharp said the first half of the year was challenging.
Trading is improving, he said, although consumers' disposable income was still under pressure.
He said: "After the challenges we faced in the first half, everyone in the business has been focused on addressing the issues we identified and on delivering on the priorities we set out in April to deliver long-term sustainable growth.
"Our performance in the second half reflects this, with operating profit up on the previous year," Mr Sharp said.
But he added: "Customers tell us that although they are encouraged by economic improvements, this has yet to translate into higher disposable income and the market remains tough."
Debenhams shares have tumbled more than 20% this year, coming after a profit warning and heavy discounting to shift stock.
As part of a turnaround plan, Mr Sharp has been cutting costs and introducing new concessions in Debenhams stores, including Sports Direct, Costa, and Mothercare. Sports Direct owner Mike Ashley has built an 11% interest in Debenhams.
Annual profits at Debenhams have fallen 24.8%, reflecting the impact on sales of last year's warm winter weather.