Debenhams hails ‘successful transformation’ as loss narrows
Debenhams’ owner has hailed a “successful transformation” following its drastic turnaround, though the fast-fashion group still posted a £100m loss.
The AIM-listed group, which owns brands including Debenhams, Pretty Little Thing and Karen Millen, saw its pre-tax loss narrow by 69 per cent to £108m in the year to February.
The fashion firm, which is listed as Boohoo, has been undergoing a drastic transformation as it attempts to stem huge losses and reinvent itself from a high-street retailer into an online operator.
Although Debenhams Group saw revenue fall by 25 per cent to £917m, the firm said this is because it has “deliberately” switched to a higher-margin marketplace model, in which the income from commission, rather than the full transaction value, is labelled as revenue.
Its share price fell by two per cent to 24.5p on Tuesday’s market open, though the stock has gained 42 per cent in the last month.
The listed business saw gross margin improve by 0.4 per cent to 51.1 per cent, marking the first improvement since 2022. The group said it is seeing a higher volume of 100 per cent margin sales.
Chief executive Dan Finley said each of the group’s brands is now profitable on an adjusted earnings basis, toasting a “year of significant and successful transformation”.
Billionaire fast-fashion tycoon Mike Ashley’s Frasers Group holds a 29 per cent stake in Debenhams Group and, in 2024, made a failed attempt to gain a seat on its board.
Finley’s turnaround plan has included a drastic cost-cutting regime, and Debenhams said on Tuesday that it is on track to make a further £100m in cuts in the coming year, bringing total savings under the new management to £200m.
The company noted that the Debenhams brand “sits at the centre of the group going forward,” with its marketplace model having been rolled out in Ireland, Australia and the US this year.
Finley, who took the reins in November 2024, explained: “The cost base has been reset, warehouse consolidation completed, the tech re-platform delivered, stock rightsized, and onerous costs exited. The turnaround is firmly on track.”
Debenhams Group said it expects to improve its margins and further narrow its statutory loss in the coming financial year.
The group was praised by analysts last week when it announced the sublease of its US distribution centre, which Finley described as “a major contributor to the challenges that the company has faced”.
Analysts at Zeus said Debenhams has delivered a “year of decisive transformation”.
The shift to a marketplace model “masks” the fashion group’s topline improvements, amid boosts to profitability, cash conversion and balance-sheet quality, they said.
The analysts said that the fashion firm “remains fundamentally undervalued, but this should continue to correct” if its management delivers on double-digit earnings growth.
Wayne Brown, an analyst at Panmure Liberum, described Debenhams Group as “one stock that is marching forward and delivering on everything they have said they would”.