Online retail group Debenhams has returned to profit at the earnings level as sales accelerated, with management forecasting further improvement as its cost-cutting programme and wider turnaround gather pace.
The group, which owns brands including Boohoo and Pretty Little Thing, reported adjusted earnings before interest, tax, depreciation and amortisation of £20mn for the six months to August 31, compared with a £3mn loss a year earlier.
Chief executive Dan Finley said the performance represented further progress in the retailer’s restructuring.
“Our turnaround continues at pace.
“This is a strong first half and, importantly, one where growth accelerated as we went through it.”
Debenhams reported an increase of 1.8 per cent in gross merchandise value, its preferred measure of sales, over the first half. Growth accelerated from 0.5 per cent in the first quarter to 2.9 per cent in the latest three-month period.
The Debenhams brand was the strongest performer, with sales rising 14.1 per cent. Boohoo, Pretty Little Thing and Karen Millen also returned to growth, suggesting that the group’s efforts to stabilise its portfolio of brands are beginning to gain traction.
The improvement in reported earnings was also supported by a sharp reduction in exceptional costs. These fell 83.5 per cent to £4mn during the period.
Management said it expects a “continued material improvement” in earnings and a return to profitability for the full financial year.
The group is targeting £100mn of cost savings by next year as it seeks to improve margins and simplify its operations.
Debenhams is also working to reduce its balance-sheet leverage. Net debt stood at £102mn, but the company expects proceeds from recent disposals to reduce borrowings to “negligible” levels by the end of its 2027 financial year.
The latest disposal was the sale of women’s fashion brand Nasty Gal for US$16mn (£11.9mn) to WSG Brands. The transaction followed the £90mn sale of the group’s Sheffield distribution centre to Primark, which plans to use the site to support its home-delivery operations.
Finley said the disposals, alongside falling lease costs and the cost-saving programme, had strengthened the group’s financial position.
“With the cost programme ahead of plan, lease costs falling and net debt down year on year, we are reiterating our guidance of double-digit adjusted EBITDA growth and free cash flow in full-year 2027.
“Since the half-year end, the Sheffield distribution centre and Nasty Gal disposals mark a further significant step in reducing leverage, and we now expect net debt to be negligible at our February 2027 year end.”
The results mark another stage in Debenhams’ attempt to rebuild profitability after years of pressure on its online fashion businesses. The focus is now shifting from stabilising sales to converting improved trading momentum and lower costs into sustained cash generation.
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