Debenhams Group's £90m debt burden is set to be significantly reduced through a combination of brand sales and property disposals, according to the company's latest strategy. This move aims to bring its net debt below pre-tax earnings, signalling a crucial milestone in its corporate turnaround efforts. The fashion firm, which operates the Debenhams marketplace alongside popular brands such as Boohoo and Pretty Little Thing, has identified "strategic brand licensing opportunities and potential business disposals" as key drivers of this initiative.
The AIM-listed company's net debt stood at £93m at its financial year end in February, a 19 per cent increase on the previous year. Analysts suggest that selling its non-core property assets, including the substantial 1.8 million square foot Burnley warehouse, could inject up to £30m into the business. Debenhams Group has indicated that brand disposals are a viable option, but its Karen Millen business is unlikely to be sold due to its "quality" and "global potential." Conversely, Pretty Little Thing was previously considered for sale but has been retained following a return to growth and profitability.
Chief executive Dan Finley reported a "successful transformation" last month, despite the group's pre-tax loss of £108m. Finley stated that each of the group’s brands is now profitable on an adjusted earnings basis, demonstrating the turnaround plan's momentum. The strategy includes an additional £100m in cost cuts planned for the coming year, bringing total savings under current management to £200m.
The company's shares had dipped to around 10p in November but saw a bounce following a £35m equity raise. On Tuesday morning, the stock jumped four per cent to 25p. Analysts at Panmure Liberum noted the clear momentum at Debenhams, anticipating that benefits from the marketplace model will become more evident as transformation costs subside. The group reported "positive" trading in June and July, capitalising on summer weather.