Debenhams Group has said its multi-year turnaround is beginning to accelerate after it returned to growth in its first quarter.
The retail group, which is listed on AIM as Boohoo, reported a 0.5 per cent rise in gross merchandise value in the three months to 31 May, while gross margin expanded to 53.5 per cent from 52.1 per cent a year earlier.
Trading strengthened significantly in May, with gross merchandise value up around eight per cent year on year.
Debenhams and PrettyLittleThing were the group’s strongest performing brands during the period, while improvements were also recorded across Boohoo, BoohooMan and Karen Millen.
Debenhams Group chief executive Dan Finley said: “This is the result of the heavy lifting of our multi-year turnaround: the move to an asset light marketplace model, the warehouse consolidation, the cost reset, and the rebuild of every brand on a single proprietary platform.
“That work is now translating into materially improved profitability, with adjusted EBITDA margin expanding and a substantial increase in adjusted EBITDA in the period, alongside significantly improved cashflows.”
The group said the momentum seen in the first quarter had strengthened its confidence in delivering double-digit percentage growth in full-year adjusted EBITDA, ahead of the £53m guidance set out for FY26 in March.
Shares in the business jumped 19 per cent following the trading update, rising to more than 22p, although the stock remains down around three per cent so far this year.
The retailer said its cost-cutting programme was also gaining traction, with exceptional costs falling 72 per cent in the quarter and capital expenditure dropping 54 per cent year on year.
PrettyLittleThing, which was revamped last year, has helped drive the recent improvement, alongside lower volumes of returns applications.
Analysts said the business was benefiting from its shift away from a pure fast fashion model towards an asset-light marketplace approach, supported by third-party sellers across its platforms.
Wealth Club chief investment strategist Sarah Streeter said: “Its turnaround strategy has been rooted in rebuilding the group around the Debenhams marketplace platform to try and counter several bruising years of sliding sales.”
AJ Bell investment director Russ Mould said the recovery had been a “hard slog” following the pandemic, but added that progress against a difficult consumer backdrop was “a feather in the cap for management”.
Panmure Liberum analyst Wayne Brown described the update as a “major inflection point” for the company’s turnaround.
“The turnaround plan to simplify the operations, cut major costs, integrate all the brands into one ecosystem and then reinvigorate the brands seems to be coming together,” he said.
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