Boohoo Group gets new name and business model as Debenhams success sweeps all before it

When scrolling through London Stock Exchange filings to find stories to report on, the usual headlines are pretty dull (“transaction in own shares”, “new corporate presentation”, “full-year results” etc). But on Tuesday, Boohoo Group filed one entitled “Debenhams is back”, which was something of an attention-grabber.

So what did Boohoo have to share? The news that the “successful multi-year turnaround” of Debenhams is now complete and the  “reinvigorated business” is now the majority contributor to group profitability.

That’s great news for a group that has been under pressure for several years. What came next was an obvious step… the entire business is being renamed Debenhams Group.

The company said Debenhams “has been successfully turned around since it was acquired out of administration in 2021. It has been repositioned as Britain’s online department store and is underpinned by a new marketplace-led business model. Debenhams is growing rapidly. The business model is stock-lite and capital-lite. It is very profitable and highly cash generative”.

Changing the name to Debenhams makes senses given that “Debenhams is once again becoming [consumers’] destination of choice. It is an iconic British heritage brand with huge brand awareness and significant consumer trust. For our partners, Debenhams is becoming a partner of choice, providing access to millions of consumers and driving strong growth for those selling on the Debenhams platform”. 

The group sees “significant future growth opportunities” for it with a medium-term ambition to create a multi-billion-pound GMV business with a target of around a 20% EBITDA margin on a net sales basis. 

As for its impact on the rest of the company, the ongoing business review has confirmed that “Debenhams, its business model and its technology is at the epicentre of our group going forward. It is the driving force of the business and will lead the group recovery. It is at the heart of the investment case”.

That also makes sense and sees the group moving away from a positioning as a cheap seller of fast fashion that saw it battered by cheaper, nimbler rival Shein.

It said that under group CEO Dan Finley (who was originally Debenhams CEO), the “marketplace-led business model, proprietary technology and lean operating model will be extended across the group. This is critical to the turnaround of the youth brands and will help accelerate value creation in Karen Millen”.

And the company added that the now-renamed group “is sharply focused on maximising value for all shareholders. It will be at the forefront of global digital retail. It will be a leaner, faster and more technologically advanced business — utilising next-generation technology to maximum effect. The group will be underpinned by a new ESG strategy”. 

Debenhams success, Youth Brands challenges

The Tuesday release also told us that the Debenhams business (the e-marketplace that is, not the entire group) is fast-growing and highly profitable, with a roughly 12% EBITDA margin on a net sales basis.

Debenhams sells around 15,000 brands across fashion, beauty and home and is also the home for the group-owned labels, including Wallis, Burton, MissPap, Coast, Oasis, Dorothy Perkins and Warehouse, “which have now been turned around” and which combined have a 7% EBITDA margin.

In the Youth Brands category, we’ve already heard this month about the rebrand of the group’s PrettyLittleThing (PLT) label with a more upmarket positioning. And the company said that in PLT, Boohoo and MAN, it has “three highly relevant online retail brands that between them serve approximately 15 million customers and [have] a social media reach of c.50 million”. 

It admitted that “recent trading has been tough for Youth Brands, but the group believes there’s “future potential in these brands by pivoting them to be fashion-led marketplaces and by investing to strengthen the consumer proposition. We believe this will enhance the consumer experience, increase the group’s share of wallet and reduce future stockholding requirements. This will be underpinned by the leaner Debenhams operating model”. 

It recognised that this “turnaround will take time and that we have a period of substantial change ahead of us” but it has addressed legacy stock issues and significantly reduced operating costs. On Boohoo, it has “created a community of over 1,400 brands, which grows every day and we are pleased with the traction this is gaining with our consumer”.

It also said that Karen Millen has been transformed into a digital-first, premium global brand. Its future growth potential is “significant as it evolves into a premium lifestyle destination, accelerated through marketplace (including pre-loved luxury), licensing and international expansion”.

ESG focus and trading update

As for the aforementioned new ESG strategy, it announced four new partnerships. These are with Segura, “a global leader in supply chain visibility, to deliver transparency in our end to end supply chain”; the Carbon Trust “to turn our environmental ambitions into impact through the development of a robust Net Zero Transition plan”; with Pennies, “the UK’s leading micro-donation tech charity, to drive positive social change”; and with the Graduate Fashion Foundation “to invest in and develop future fashion talent”.

That’s all well and good for the future, but how did the last year go for the business? The company raised cash and cut debt and costs during the year, but as far as its performance was concerned, Debenhams aside, it still clearly has work to do it, as it has recognised.

In FY25, group GMV pre-returns was almost £2.322 billion, down from £2.581 billion in the previous financial year. Debenhams jumped to £654 million from £488.7 million but Karen Millen dipped to £157.1 million from £161.9 million. Meanwhile the Youth brands fell to £1.51 billion from £1.93 billion.

Post-returns, those GMV figures were £1.639 billion for the group, down from £1.784 billion. And group revenue fell to £1.22 billion from £1.461 billion. Debenhams revenue was £204.6 million, up from £186 million, while at Karen Millen it fell to £68.4 million from £70.1 million. The Youth Brands dropped to £947.3 million from just under £1.205 billion.

The group expects to report adjusted EBITDA for FY25 of around £40 million. And while it continues to invest in the Youth Brands in the short term as part of their turnaround, it’s raising its medium-term guidance for Debenhams to EBITDA margins of around 20%, as mentioned earlier. Medium-term targets for Karen Millen and the Youth Brands remain unchanged, with double-digit EBITDA margins for Karen Millen and 6%-8% EBITDA margins for the Youth Brands.

New CFO

The company also said that reflective of this new strategy and the acceleration of the group to the Debenhams-led business and operating model, Phil Ellis will become group CFO and a member of the board, replacing Stephen Morana with immediate effect. 

Ellis is currently finance firector of Debenhams and MD of DebenhamsPay+. He’s worked for Dan Finley for over six years. He has “extensive commercial finance experience in the retail industry” and immediately prior to the Debenhams job, he held senior financial roles at JD Sports for six years, and seven years at The Very Group.

So what did Dan Finley have to say about all this? On Debenhams itself he said that “we’ve created a thriving community of brand partners with millions of consumers and we are growing rapidly. The most exciting thing is that we are just getting started”.

And he added that the “successful turnaround of Debenhams is our blueprint for the wider turnaround of the group. The turnaround of our Youth Brands is under way and will take time. I have inherited significant challenges. I can see their future potential as they evolve into fashion-led marketplaces and adopt a leaner operating model.

“We go forward as Debenhams Group. This is a defining moment in our journey, reflective of our new strategy, new leadership and new beginnings.”