Debenhams Group beats profit forecasts as switch to marketplace model pays off
- Debenhams Group was renamed from Boohoo last year
Debenhams Group, which owns online fashion retailer Boohoo, expects its annual profit to come in ‘comfortably’ ahead of forecasts as its turnaround plan accelerates.
For the year to 28 February, the business said its EBITDA, a measure of a company’s profit or earnings before taking off a list of deductions, looked set to reach £53million.
This would represent a 36 per cent improvement on the previous year, driven by a 76 per cent surge in the second half of the period, it added.
The online fashion retailer said this latter half increase in profit reflected the accelerating impact of a cost-cutting and restructuring programme launched after the group ran into financial difficulties.
The business has already secured around £50million in annual savings and cut its staff headcount by 30 per cent to help transform its operations.
Shares in the group, which trades as Boohoo on the London Stock Exchange, rose 4.7 per cent or 0.82p to 18.16p on Monday morning, having fallen around 30 per cent in the past year.
Looking ahead: Debenhams Group, which was renamed from Boohoo last year, expects its annual profit to come in ‘comfortably’ ahead of forecasts
Marketplace model
The group has been moving away from holding large amounts of its own stock and moving towards a marketplace model, where third-party brands sell through its platforms in exchange for a fee.
Fixed costs have been reduced to an annual run-rate of £119million, down from £175million a year ago and £11million lower than the guidance issued in February, with costs now expected to fall to £100million in the current financial year.
The firm’s net debt stood at £90million by the end of the period, helped by a £40million fundraising completed last month.
The business, which also runs brands including Karen Millen, said it now expects double-digit underlying earnings growth in the 2026-27 financial year as sales continue to improve.
Sales falls by gross merchandise value narrowed to 5 per cent in the three months to the end of February.
In February, Debenhams Group raised £40million in an investor cash-call to bolster its balance sheet and cut debt.
The group said it continued to explore opportunities to help drive an ‘asset-lite model’, by, for instance, selling parts of the business, entering supply chain partnerships, strategic intellectual property licensing and other financing options.
Last month, the group halted plans to potentially sell off its PrettyLittleThing brand, but it is yet to reveal which other parts or brands it may be looking to offload.
Plans to slash property costs are set to see lease costs fall from £18million in the 2025-26 financial year to around £13million in 2026-27, it said on Monday.
Chief executive Dan Finley said the group had reset its cost base, completed a warehouse consolidation, migrated to a new technology platform and ‘rightsized’ its stock levels, work he described as ‘significant progress, ahead of our plan’.
He said: ‘Our pivot to the stock-lite, capital-lite, highly profitable marketplace is working.’
Susannah Streeter, chief investment strategist at Wealth Club, said: ‘On the retail front, the Debenhams Group is the latest to shift to a marketplace model and its metamorphosis is reaping rewards.
‘It’s followed the rest of the fashion pack, like Next and Marks and Spencer, to offer space on its online rack for third-party brands who pay a fee for the privilege.’
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