Debenhams Group (LSE:DEBS) has reported further progress in its turnaround programme, with management stating that the business has reached a key milestone in its transformation journey. The group returned to growth during the first quarter, supported by improving operational performance, stronger margins and enhanced cash generation.
Gross merchandise value (GMV) increased by 0.5% year-on-year during the quarter, while trading accelerated significantly in May, with growth of approximately 8%. Performance was led by the Debenhams marketplace and PrettyLittleThing, both of which contributed to the improving sales trend.
Margins and Cash Flow Show Significant Improvement
The company reported meaningful gains in profitability as operational efficiencies and strategic changes continued to take effect. Gross margin improved to 53.5%, while adjusted EBITDA margins also strengthened.
Several elements of the transformation programme contributed to the improvement, including lower product return rates, a substantial reduction in exceptional costs and tighter control of capital expenditure. Exceptional items fell by 72%, while capital investment was reduced by half compared with previous levels.
Management also highlighted the benefits of warehouse consolidation, ongoing cost-reduction initiatives and the transition toward an asset-light marketplace model, which has reduced operational complexity and improved capital efficiency.
Focus on Leaner Operations and Lower Debt
The group remains committed to simplifying its portfolio and strengthening its balance sheet. Management reiterated its expectation of delivering double-digit adjusted EBITDA growth and positive free cash flow in FY27.
As part of its long-term plan, Debenhams aims to reduce annual fixed costs to £100 million by 2027. The company also intends to dispose of its Burnley property and its U.S. warehouse facility, with proceeds expected to support debt reduction and help lower leverage to below one times adjusted EBITDA.
Additional targets include reducing annual capital expenditure to approximately £8 million and gradually lowering lease-related costs to around £6 million. Together, these initiatives are designed to create a more scalable and capital-efficient business model.
Turnaround Progress Balanced by Ongoing Challenges
Although operational trends are improving, the company continues to face broader financial challenges. Revenue remains well below historic levels, losses persist and leverage remains elevated despite ongoing efforts to strengthen the balance sheet. Operating cash flow also remains under pressure.
Technical indicators currently remain weak, with the shares trading below key moving averages. However, oversold conditions suggest sentiment may already reflect some of the challenges facing the business.
The success of the turnaround strategy will likely be measured by the company’s ability to sustain revenue growth, improve profitability and generate consistent free cash flow over the coming years.
More About Debenhams Group
Debenhams Group, part of boohoo group plc, operates a portfolio of online retail brands focused on fashion, beauty and home products. Its core platforms include Debenhams, Karen Millen, boohoo, MAN and PrettyLittleThing, serving millions of customers through digital-first retail channels. Having evolved from its historic department store origins, the business is increasingly focused on marketplace-led growth supported by its proprietary technology infrastructure and asset-light operating model.
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