Shares in Debenhams (DEBS:AIM) rallied after the online fashion group guided for FY26 adjusted EBITDA of £53 million.
That is ‘comfortably ahead’ of previously-upgraded guidance. The revised estimate represents a 36% year-on-year earnings increase as the turnaround gathers pace.
The upgrade largely reflected a 76% surge in H2 earnings. Cost-cutting and a pivot towards a ‘stock-lite, capital-lite’ marketplace continued to pay off for Debenhams.
This pivot remains central to the recovery plan at the group behind boohoo, Karen Millen and PrettyLittleThing. Debenhams also raised its FY27 outlook. The retailer expects to deliver double-digit growth in adjusted EBITDA.
Focused on growth
‘The cost base has been reset, the warehouse consolidation completed, the tech re-platform delivered’, said CEO Dan Finley, adding the stock base had been rightsized. Furthermore, the company has exited most of its onerous costs and strengthened its brand management teams.
‘This is significant progress, ahead of our plan, but there is still more to be delivered and we now focus on growth,’ added Finley.
Debt coming down
Debenhams’ net debt stood at £90 million as of 28 February 2026. That represents under two times adjusted EBITDA, helped by a recent £40 million fundraising. The board expects that ratio to fall below ones times by the end of FY27.
Zeus upgraded its FY27 adjusted EBITDA forecast from £55.4 million to £58.3 million. It sees Debenhams swinging from losses of £19 million to pre-tax profits of £20.6 million.
The broker believes there is more upside as Debenhams is ‘viewed and valued more like a marketplace business’.
Zeus has a 56p price target for the stock based on its sum-of-the-parts (SOTP) analysis.
Debenhams looks like an interesting punt for risk-tolerant investors.
The transition to an asset-lite model is bearing fruit, free cash flow is improving and debt is falling.
Despite the weak consumer backdrop, Debenhams’ sales trend is improving too. And major shareholder Frasers (FRAS) will keep management on its toes.
Read the press release here: https://www.debenhamsgroup.com/investors/regulatory-news/
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