The profit improvement was driven by a 76% surge in underlying earnings in the second half of the period. Debenhams Group said this second-half increase reflects the accelerating impact of a cost-cutting and restructuring programme launched after the group ran into financial difficulties. The business has secured around £50 million in annual savings. The group has cut its staff headcount by 30%, and fixed costs have been reduced to an annual run-rate of £119 million, down from £175 million a year ago and £11 million lower than the guidance issued in February. Costs are now expected to fall to £100 million in the current financial year. Plans to slash property costs are set to see lease costs fall from £18 million in the 2025-26 financial year to around £13 million in 2026-27.
The firm's net debt stood at £90 million by the end of the period. The net debt reduction was helped by a £40 million fundraising completed last month. The group's shares plummeted as much as 20% in February when it announced an equity raise. The equity raise scheme took £40 million, exceeding the initial target.
The group has been moving towards a marketplace model where third-party brands sell through its platforms in exchange for a fee. The group continued to explore opportunities to help drive an 'asset-lite model', such as selling parts of the business, entering supply chain partnerships, strategic intellectual property licensing, and other financing options. The group halted plans to potentially sell off its PrettyLittleThing brand last month. Debenhams Group said its turnaround has been driven by slashing 'most of [its] onerous costs' and moving towards an 'asset-lite model'.
Sales falls by gross merchandise value narrowed to 5% in the three months to the end of February. The business expects double-digit underlying earnings growth in the 2026-27 financial year. Debenhams Group said each of its brands, including Boohoo, Pretty Little Thing, and Karen Millen, are trading profitably.
Shares in Debenhams Group rose on Monday morning. A non-executive director quit following the equity raise scheme, describing the company as 'undervalued' by its market value. This forecast upgrade is the group's third this year.