Debenhams Group shares fell sharply in early trading after the online fashion retailer confirmed plans for a £35m equity fundraise, reportedly aimed at strengthening its balance sheet and accelerating its turnaround strategy.
The company said the planned capital raise would improve liquidity, provide greater financial flexibility and support efforts to reduce debt, as it continues its transition towards an asset-light, marketplace-led model.
Shares opened down 6.7 per cent on Tuesday morning, before falling further to mark a drop of around 10 per cent as investors reacted to the announcement.
The group, which recently rebranded from Boohoo Group in March of 2025, owns brands including boohoo, boohooMAN, Karen Millen and PrettyLittleThing. It noted that the fundraising would help reduce its net debt significantly, with a longer-term ambition to curtail the debt further.
Strengthening the balance sheet
Debenhams said the equity raise forms part of a broader effort to create what the board described as an “optimal capital structure” as it seeks to move beyond a period of financial uncertainty and complete its turnaround.
Alongside the fundraise, the company is reportedly in advanced discussions with its lending syndicate to amend borrowing terms and improve covenant flexibility, with revised terms expected to be conditional on the completion of the equity raise.
Directors including chief executive Dan Finley, founder Mahmud Kamani and Iain McDonald intend to participate in the fundraise at a price of 20p per share. The company said it has also received indications of support from several institutional shareholders ahead of the launch.
Cost cutting and simplification strategy
The fundraising follows a period of significant restructuring within the business, as Debenhams continues to simplify operations and reduce fixed costs.
The company said its fixed cost exit rate has already fallen to £130m from £175m, with a target of reducing this further to £100m. Lease costs are expected to decline from £17m in FY26 to around £13m in FY27, with further reductions anticipated once a vacant US property lease is exited.
Capital expenditure is also forecast to halve to approximately £8m in FY27, which the group expects will improve cash generation. As capex falls below depreciation levels, the board said it will increasingly focus on free cash flow as a key performance metric.
All brands within the portfolio are now trading profitably on an adjusted EBITDA basis, according to the company, following a turnaround in performance at PrettyLittleThing.
The brand had previously been considered for disposal but will now be retained after improvements in sales and brand positioning.
Next phase of the turnaround
Debenhams said the additional capital would help accelerate its shift towards an asset-light operating model, with the business exploring further deleveraging options including strategic IP licensing, supply chain partnerships and potential non-core asset disposals.
The group raised its outlook earlier this year, upgrading adjusted EBITDA expectations from £45m to £50m for FY26, citing improving momentum across its youth-focused brands.
Despite the improved trading outlook, the share price reaction shows ongoing investor caution as the retailer continues efforts to stabilise its finances following several years of volatility in the online fashion sector.
The planned fundraise is expected to be launched following discussions with institutional investors, with further details to be announced in due course.
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