Debenhams owner could sell brands to slash debt
Debenhams Group could sell off some of its brands in a bid to eliminate its £90m debt, as the fashion firm continues its turnaround.
The group, which owns the eponymous former department store as well as Boohoo and Pretty Little Thing, plans to slash its debt to below the level of its pre-tax earnings and could sacrifice some brands to do so.
“With strategic brand licensing opportunities and potential business disposals, there is the opportunity to eliminate the debt,” the AIM-listed firm said on Tuesday.
The firm’s net debt stood at £93m at the end of its financial year in February, 19 per cent higher than at the same time the year before.
The group appeared to rule out selling off its Karen Millen business, which it said “remains a quality brand with significant global potential”.
Likewise, Debenhams hailed a return to “growth and profitability” at Pretty Little Thing. The group had been considering selling the fast-fashion brand but opted to hold onto it earlier this year.
Debenhams to cut £90m debt
The group said it will also cut its debt by selling off non-core property. Debenhams has put its 1.8m sq ft Burnley warehouse up for sale, which analysts said could go for as much as £30m.
The AIM-listed firm, previously named Boohoo Group, has undergone a significant turnaround in recent years, as it shifts from a high street retailer into an online marketplace operator.
Last month, chief executive Dan Finley hailed a “successful transformation” though the group still posted a £108m pre-tax loss.
Finley said each of the group’s brands is now profitable on an adjusted earnings basis, putting its turnaround “firmly on track”.
Billionaire fast-fashion tycoon Mike Ashley’s Frasers Group holds a 29 per cent stake in Debenhams Group and, in 2024, made a failed attempt to gain a seat on its board.
£200m cost-cutting plan
Finley’s turnaround plan has included a drastic cost-cutting regime, and Debenhams plans to make a further £100m in cuts in the coming year, bringing total savings under the new management to £200m.
Shares in Debenhams had declined to around 10p in November but took a bounce after the group clinched a £35m equity raise. The stock jumped four per cent to 25p on Tuesday morning.
Debenhams Group saw “positive” trading in June and July as it capitalised on the hot summer weather, it said on Tuesday.
Analysts at Panmure Liberum said: “The momentum at Debenhams is clear and we now enter a period where transformation costs fall away, and the power of the marketplace model should start to be seen much more clearly.”