Debenhams Group returns to profitability as turnaround gains momentum

UK online retail group Debenhams Group, formerly known as Boohoo Group plc, posted its unaudited interim financial results for the six months ended August 31, 2026, delivering its first positive statutory profit before tax since August 2021.

The group reported statutory profit before tax of 28.3 million pounds for the first half of the financial year 2027, reversing a statutory loss before tax of 17.9 million pounds in the same period last year. Excluding non-cash lease credits, loss before tax narrowed from around 52 million pounds to approximately 12 million pounds, while profit after tax reached 25.8 million pounds, compared with a loss after tax of 14.7 million pounds in the prior-year period.

Commenting on the results, Debenhams Group chief executive officer Dan Finley stated: “The turnaround continues at pace. This is the first time the Group has delivered positive profit before tax since August 2021. I am pleased to report that net debt is expected to be negligible at year-end. This is significantly ahead of our original guidance provided at the start of the year. I see material opportunities ahead and we are fully focused on maximising them.”

Marketplace expansion drives gross margin growth

Gross merchandise value (GMV) pre returns expanded 1.8 percent to 863.8 million pounds, benefiting from an acceleration in quarterly performance from 0.5 percent growth in the first quarter to 2.9 percent in the second quarter. Driven by lower return rates, which fell by 1.3 percentage points to 28.3 percent, GMV post returns increased 3.7 percent to 619.5 million pounds. Group revenue declined 3 percent to 409.6 million pounds, down from 422.4 million pounds in the corresponding period.

The group noted operational progress across its brand portfolio, led by the Debenhams brand, which saw GMV pre returns rise 14.1 percent to 363.8 million pounds, representing roughly 42 percent of total group GMV. Combined GMV pre returns for PrettyLittleThing (PLT) and Boohoo rose 1.1 percent to 368.8 million pounds, supported by management team consolidation across young fashion womenswear. Karen Millen reported a 4.8 percent decrease in GMV pre returns to 51.4 million pounds, while Man declined 28 percent to 79.8 million pounds as management prioritized profitability over volume.

The marketplace model expanded to 38.9 percent share of total GMV pre returns, up from 32.7 percent in the previous year. This shift contributed to a 220 basis point improvement in gross margin, which rose to 54.1 percent from 51.9 percent. Gross profit reached 221.5 million pounds, up 1 percent from 219.3 million pounds.

Adjusted EBITDA grew 14.6 percent to 24 million pounds, yielding an adjusted EBITDA margin of 5.9 percent, up 90 basis points year-over-year. Reported EBITDA swung to 19.7 million pounds from a loss of 3.5 million pounds in the comparative period, supported by an 82.4 percent drop in exceptional costs to 4.3 million pounds.

Post-period disposals to lower net debt

Free cash flow turned positive at 5.6 million pounds, compared with an outflow of 22.1 million pounds in the prior-year period, as capital expenditure was reduced by 26.7 percent to 5.5 million pounds. Net debt stood at 98.5 million pounds at the end of August 2026, down from 111.1 million pounds a year earlier.

Subsequent to the reporting period, Debenhams Group completed the 90 million pound disposal of its Sheffield automation facility and lease assignment on September 10, receiving 76.5 million pounds post-period-end with the remaining 13.5 million pounds due upon vacant possession in early 2027 and the sale of Nasty Gal on September 15 for 16 million dollars.

To support operations following the Sheffield transaction, the group appointed GXO as its third-party logistics partner to migrate fulfilment to its Burnley facility. Consequently, the group has retained the Burnley site, removing its previous classification as held for sale.

Looking ahead, the board reiterated its full-year guidance, expecting GMV growth and adjusted EBITDA of no less than 59 million pounds, alongside positive profit before tax, free cash flow generation, and negligible net debt. Over the medium term, the group targets a marketplace mix exceeding 50 percent of GMV and aims to deliver more than 100 million pounds in profit before tax.