Key facts
- Debenhams Group may sell brands to reduce its £90 million debt.
- The company's net debt stood at £93 million in February.
- Debenhams plans to sell non-core property, including a large warehouse.
- The group is implementing a cost-cutting plan aiming for £200 million in total savings.
- Debenhams reported positive trading in recent months.
Debenhams Group is exploring the sale of some of its brands as a strategy to reduce its significant debt burden, which stood at £93 million at the end of February, a 19% increase from the previous year. The company, which operates under the Debenhams name and owns brands such as Boohoo and Pretty Little Thing, aims to cut its debt to below its pre-tax earnings level.
"With strategic brand licensing opportunities and potential business disposals, there is the opportunity to eliminate the debt," the AIM-listed firm stated. While the group appears unlikely to sell its Karen Millen business, citing its quality and global potential, it has reported "positive" trading in June and July, capitalizing on warm weather. Pretty Little Thing has also returned to growth and profitability, a brand the group had previously considered selling but decided to retain.
In addition to potential brand sales, Debenhams plans to divest non-core property assets, including its 1.8 million square foot Burnley warehouse, which analysts estimate could fetch up to £30 million. The company, formerly known as Boohoo Group, has been undergoing a transformation from a high street retailer to an online marketplace operator. Despite a £108 million pre-tax loss reported last month, chief executive Dan Finley described the turnaround as "successful," noting that each brand is now profitable on an adjusted earnings basis.
Finley's turnaround plan also involves aggressive cost-cutting, with an additional £100 million in savings planned for the upcoming year, bringing the total savings under new management to £200 million. The company's stock, which had fallen to around 10p in November, saw a four percent jump to 25p on Tuesday morning following a £35 million equity raise. Analysts at Panmure Liberum expressed optimism about Debenhams' momentum, anticipating that transformation costs will decrease and the marketplace model's effectiveness will become more apparent.