Boohoo rebrands as Debenhams in shift to a marketplace model
Boohoo will rebrand to Debenhams as it shifts to a marketplace model to house its brands in the first phase of its turnaround plan.
Shares in the company dropped just over three per cent on the news.
The Manchester-based company has been struggling with low sales for its youth brands—Boohoo, PLT, and MAN—posting a pre-tax loss of £147.3m in the first six months of 2024.
But Boohoo said it believed Debenhams, which the group bought in 2021 for £51m, has a “clear runway” to multi-billion-pound sales and an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 20 per cent.
“Since the acquisition of Debenhams out of administration in 2022, Debenhams has been successfully turned around and repositioned as Britain’s online department store, underpinned by a new marketplace led business model.
“The success of the marketplace model will be extended across the group, reflecting a strategic approach designed to deliver value for shareholders and customers and a turnaround for the youth brands,” Boohoo said.
Under the new strategy, Karen Millen and the company’s youth brands will move to marketplace platforms, offering a range of third-party brands under a capital-light drop ship model, i.e. a third-party supplier will handle shipping and inventory.
The company also committed to revitalising these brands, “by pivoting them to be fashion-led marketplaces and by investing to strengthen the consumer proposition”, it said.
As part of the turnaround plan, Phil Ellis has been appointed as chief financial officer with immediate effect. He joined the company in 2022 as finance director of Debenhams, having previously held senior financial roles at JD Sports and The Very Group.
Analysts support rebrand
Analysts were largely optimistic about the rebrand, with Panmure Liberum analysts calling it an “exciting strategy that is transforming the group”.
“The Debenhams marketplace is the growth driver, the biggest contributor to group profits and the engine behind the strategy to turn the fashion brands around,” Panmure analysts said.
“Further cost savings, lower stock risk and launching fashion marketplaces are all part of a plan to further leverage the Debenhams playbook and technology,” they added.
Zeus analyst Rachel Birkett noted that Debenhams has scaled significantly since its relaunch in 2022, and added that it has “significant and valuable brand heritage, awareness and trust in the UK”.
“We believe the renaming of the group reflects management’s strong conviction in [its new] strategy, with the high-growth, profitable Debenhams business to be core to the group’s operations going forward,” Birkett added.
Russ Mould, investment director at AJ Bell, said: “Retailers are increasingly going down the multi-brand path to sell goods. Next operates a platform to sell and ship third party goods. Marks & Spencer has gone down a similar road and now sells products from more than 100 third-party brands. It’s all about giving shoppers choice. Rather than have to click through countless websites, you can do everything from one site.
“These developments mean that Debenhams has serious competition and its resurrection is still going to take hard work to sustain momentum.
“The stock market reaction to the news is informative. Boohoo’s share price only nudged up a small amount in early trading, implying some scepticism among investors that the strategic pivot is the answer to the company’s problems.”