Debenhams Group is exploring the sale of some of its fashion brands as part of a strategy to eliminate its £90m debt burden, while continuing its transformation into an online marketplace operator. The group, which owns the Debenhams department store chain alongside Boohoo and Pretty Little Thing, aims to cut its net debt to below the level of its pre-tax earnings, potentially through brand disposals and licensing deals.
Debt reduction strategy
The company, listed on AIM, reported net debt of £93m at the end of its financial year in February, a 19% increase from the previous year. In a statement on Tuesday, the group said: "With strategic brand licensing opportunities and potential business disposals, there is the opportunity to eliminate the debt." The group dismissed the idea of selling its Karen Millen brand, describing it as "a quality brand with significant global potential," as reported by City AM. Similarly, Debenhams celebrated a return to "growth and profitability" at Pretty Little Thing, having previously considered selling the fast-fashion label before deciding to retain it earlier this year.
Asset sales and transformation
Debenhams also plans to reduce debt through the sale of non-core property assets. The group has put its 1.8 million square foot Burnley warehouse on the market, which analysts estimate could fetch up to £30m. The company, formerly known as Boohoo Group, has been undergoing a major transformation from a high street retailer to an online marketplace. Last month, chief executive Dan Finley hailed a "successful transformation," although the group posted a £108m pre-tax loss. Finley stated that each of the group's brands is now profitable on an adjusted earnings basis, placing its recovery "firmly on track."
Frasers Group stake and cost cuts
Billionaire fast-fashion mogul Mike Ashley's Frasers Group holds a 29% stake in Debenhams Group and made an unsuccessful bid for a board seat in 2024. Finley's recovery strategy includes a sweeping cost-reduction programme, with plans to cut a further £100m in the coming year, bringing total savings under new management to £200m. Shares in Debenhams, which had fallen to around 10p in November, recovered after a £35m equity raise. The stock rose 4% to 25p on Tuesday morning.
Positive trading and analyst views
Debenhams Group reported "positive" trading in June and July, benefiting from hot summer weather. Analysts at Panmure Liberum noted: "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."
