Deal to sell Sheffield warehouse for £90m provides boost for Boohoo owner Debenhams
Boohoo owner Debenhams has said the turnaround of its financial performance is gaining momentum as it reported a return to profit for the first time in five years.
The online retail group reported growth for its Debenhams, Pretty Little Thing and Boohoo brands. It has been taking steps to reduce its cost base by selling off parts of the business. This has included disposing of its Sheffield warehouse in a £90m deal with rival retailer Primark, and selling the Nasty Gal fashion brand to a US company WSG Brands for $16m (£12m).
This helped reduce the company’s debts and return it to a profit. Pre-tax profits came in at £28.3m for the six months to the end of August, swinging from a loss of £17.9m over the same period last year.
Group chief executive Dan Finley said it marked the “first time the group has delivered positive profit before tax since August 2021”.
Gross merchandise value (GMV), the group’s preferred sales measure, increased by 1.8 per cent for the half-year period, compared to last year.
This was led by 14.1 per cent growth for the Debenhams brand, while Pretty Little Thing and Boohoo edged up by 1.1 per cent.
Debenhams is hoping to secure £100m worth of cost savings by next year.
The company told investors that “additional material cost reductions” were expected in the next financial year.
Mr Finley added: “The turnaround continues at pace. The group has returned to GMV growth, gross margins are expanding and returns rates lowering. Reported EBITDA has increased over 600 per cent and profit before tax has improved to £28.3m.
“I am pleased to report that net debt is expected to be negligible at year-end. This is significantly ahead of our original guidance provided at the start of the year. I see material opportunities ahead and we are fully focused on maximising them.”
Commenting on outlook, the group said: “Trading in September continued to be good, with the group experiencing further accelerated growth.
"In respect of the full year, the board expects to deliver GMV growth and adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation) of no less than £59m, as previously guided, representing double-digit growth year-on-year, together with continued material improvement in reported EBITDA, positive profit before tax, free cash flow generation and negligible net debt.
"The £100m fixed cost target remains on track,” the company added.
At the end of August, the group’s Burnley distribution site was classified as held for sale.
The group said: “Following the period end, and as a result of the Sheffield transaction, the group has decided to retain the site, and it is no longer classified as held for sale. The group’s expectation of negligible net debt at the year-end does not assume any proceeds from Burnley.”