Shares in Debenhams (LON:DEBS) rallied after the online fashion group said ‘continued positive trading’ persisted through June and July.
The recent UK heatwave has proved more help than hindrance. And the update confirmed the boohoo-to-Karen Millen brand owner’s turnaround strategy has traction.
Debenhams expects net debt to be ‘materially lower’ in the current year due to improved trading and the sale of non-core properties. The retailer could even sell off some of its brands in a bid to eliminate debt entirely.
Multi-year turnaround in train
In a statement ahead of the firm’s annual general meeting (AGM), CEO Dan Finley said: ‘Recent trading updates, with two upgrades to guidance in nine months, have shown that our multi-year turnaround continues at pace.’
Finley added: ‘We are pleased with the continued positive trading through June and July. Gross merchandise value (GMV) continues to grow year on year, margins are up and returns are down.’
The CEO explained that Debenhams’ platform model and diversified product assortment enables the company to pivot quickly to capitalise on consumer demand. ‘This has been especially so on Debenhams during the recent hot weather,’ insisted Finley.
Debt coming down
Through improved trading and the sale of the group’s remaining non-core property assets, net debt is expected to be materially lower in the year to February 2027. As of February 2026, net debt stood at £93.2 million.
Management is committed to reducing net debt to below ones times adjusted EBITDA in FY27. Yet given strategic brand licensing opportunities and potential business disposals, ‘there is the opportunity to eliminate the debt’ according to Finley.
Shares in Debenhams have rallied more than 25% in the past year and should have further to go. The cost base has been reduced, stock levels rightsized, and every brand is now profitable at the adjusted EBITDA level.
These include PrettyLittleThing, which delivered a £15 million swing to £14 million in adjusted EBITDA profit in FY26. And also Karen Millen, which Finley insists is a ‘quality brand with significant global potential’.
The major costs of Debenhams’ transformation have now passed. And the transition to an asset-lite model is bearing fruit. Margins are improving and debt reduction is a priority for management.
In the medium term, Finley believes the Debenhams brand could become a multi-billion pound GMV business delivering more than £100 million of EBITDA. And we like the fact Mike Ashley’s Frasers (LON:FRAS) is a major shareholder and will keep Debenhams’ management on its toes.
Read the press release here: https://www.debenhamsgroup.com/investors/
