Debenhams Group results show EBITDA up, GMV down, explores sale of underperforming PLT

Debenhams Group (which used to be Boohoo Group) issued its annual results for the year to the end of February on Tuesday afternoon and said adjusted EBITDA rose 3% to £41.6 million.

There were plenty of negative figures in the report too, but some things are clear – this is still a huge operation selling a massive amount of fashion and other products. And certain parts of the business are performing much better than others. The Debenhams brand in particular is a standout performer. But PrettyLittleThing (PLT), which was recently relaunched, clearly isn’t. It had a negative impact on the results and the company is exploring its sale.

The shares spiked upwards by about 3% on the news, which is understandable given the negative impact PLT has had on the group’s performance. 

CEO Dan Finely said: “We have a clear plan to transform the business and a route map to generating sustainable profit growth. We are focused on delivering on the huge opportunity ahead for the Debenhams brand. Work is progressing to reposition and right-size the Youth Brands.

“This will be a multi-year turnaround. As part of our ongoing business review, we are exploring a potential sale of PLT. We are also assessing long-term options for our US and Burnley distribution sites to enhance efficiency and ensure alignment with our stock-lite strategy.”

He added that “all our brands are now trading profitably in terms of adjusted EBITDA”.  

The numbers

Big news indeed, although at this stage it’s not certain that PLT will be sold. So let’s look at the figures for the group with and without PLT being included. In what was clearly a year of transition as the company changed its leadership and dived deeper into a marketplace model, GMV pre-returns and excluding PLT fell 2% to just under £1.607 billion and including PLT GMV fell 10% to almost £2.322 billion.

The Youth Brands’ GMV fell 19% to £795.6 million without PLT and fell an even wider 22% to £1.51 billion with PLT included. Meanwhile Karen Millen fell 3% to £157.1 million. But the Debenhams brand was up an impressive 34% at £654 million.

GMV for the company post-returns was up 1% with PLT excluded at just over £1.137 billion but was down 8% with it included at £1.639 billion.

Total revenue excluding PLT fell 12% to £790.3 million and with it included fell 17% to just under £1.218 billion.

The gross margin excluding PLT fell to 52.6% from 53.1% and including it fell to 50.7% from 51.8%.

That’s a lot of numbers to digest but it’s very clear the PLT is an issue. 

Profit… and loss

Profit-wise, the company highlighted the adjusted EBITDA figure mentioned at the start, but some of the other figures in the report were less impressive with adjusted EBIT a loss of £21 million. That said, this was an improvement on the £30.7 million loss on that basis a year earlier. The adjusted loss after tax also narrowed by 12% to £43.4 million.

Dan Finley, who took the helm last November, said that when he stepped up from running the Debenhams brand, “the board recognised the need for change following a long period of sustained and unacceptable underperformance. My immediate focus has been on stabilising the business and positioning it to take advantage of the significant opportunities ahead”.

Of that happily positive adjusted EBITDA figure, he added: “On appointment, [such an achievement] seemed improbable, but we quickly came up with a plan, confirmed our position with the market and executed it. This has only been possible due to the aggressive actions subsequently taken, including £50 million of annualised headcount savings.”

Debenhams brand leading the way

Finley called out “the standout performance of the Debenhams brand” as the year’s highlight and the brand’s adjusted EBITDA of £25 million (up £14 million year on year). 

And he explained that the Debenhams “capital-lite, stock-lite, cost-lite, cash-generative marketplace model sits at the heart of our new strategy. The multi-year turnaround of Debenhams is the blueprint for the turnaround of the wider group”.

Other achievements include the group having “significantly reduced the capital intensity of the business. We have faced into legacy stock issues and reduced our stock holding by more than 50%. We have stopped unnecessary capital expenditure and reduced capex by more than 50%. Further reductions will be delivered this financial year”.

Improvements in its debt position have also been key and Finley explained that while “the business has been through a very challenging period which is reflected in these results. I want to assure shareholders that the business is taking the necessary actions, quickly and decisively, to address the challenges that we face. No stone will be left unturned”.