Debenhams Group reported that trading momentum carried through June and July, extending a multi-month upswing that the company says has already prompted two guidance increases over the last nine months. Ahead of its annual general meeting, Chief Executive Dan Finley described continued year-on-year growth in gross merchandise value (GMV), alongside improving margins and a decline in product returns.
Management credited the group's marketplace model with allowing a rapid response to shifting consumer demand, noting the Debenhams brand saw a benefit from recent hot weather. Within the group's portfolio, the Young Fashion division showed ongoing improvement: PrettyLittleThing has returned to both growth and profitability, while Karen Millen was described as a high-quality brand with sizeable global potential.
On the balance sheet, the company said it expects net debt to fall materially during the current financial year, a development it attributes to stronger trading and the disposal of remaining non-core property assets. Debenhams reiterated its medium-term objective of reducing net debt to below one times adjusted EBITDA by the year ending February 2027. The company added that brand licensing deals and potential business disposals might even eradicate debt entirely.
Executives also said investors should expect a markedly improved conversion of adjusted EBITDA into reported EBITDA and operating profit this year, as the burden of major transformation costs eases. A further update on first-half performance is scheduled for September.
Contextual note - Management framed the recent trading strength as part of a multi-year turnaround, emphasizing operational leverage from the marketplace model and stronger unit economics as returns fall and margins expand.
What's next - The company will provide additional detail on first-half results in September and continues to pursue asset disposals and licensing opportunities that it says could accelerate debt reduction.