Debenhams Group shares surged by a quarter in early trading on Wednesday after the company reported a return to sales growth, signalling that its sweeping turnaround plan is beginning to pay off.
The stock jumped around 25% as investors reacted to the first quarterly increase in gross merchandise value (GMV) in more than a year, with the retailer saying it is now confident of delivering double-digit earnings growth for the financial year just ended.
Sales recovery and improving profitability
The group, which owns the Debenhams, Boohoo, PrettyLittleThing, BoohooMan and Karen Millen brands, said GMV – its preferred measure of sales – rose by 0.5% in the three months to 31 May compared with the same period a year earlier. That marked a sharp reversal from the 5% decline recorded in the previous quarter to February.
Growth accelerated noticeably in May, with GMV climbing 8%, driven by strong trading at PrettyLittleThing and the flagship Debenhams brand. Improvements were also reported across Boohoo, BoohooMan and Karen Millen.
The return to growth was accompanied by materially improved profitability and significantly stronger cash flows. The group’s gross margin expanded to 53.5%, up from 52.1% a year ago, while the rate of customer returns fell by around 5% during the quarter. The adjusted EBITDA margin improved substantially year-on-year, contributing to a material increase in adjusted earnings.
Exceptional costs tumbled by 72% and capital expenditure dropped 54%, positioning the company firmly on track toward generating free cash flow. The group also reiterated its guidance for double-digit adjusted EBITDA growth for the full year, building on the £53 million guided for the previous financial year. Net debt is expected to fall to below one times adjusted EBITDA in the current year through trading cash flow and disposals.
The performance comes against a backdrop of intense competition from fast-fashion rivals such as Shein and Temu, Chinese-origin platforms that have rapidly grabbed market share in the West with AI-driven trend responsiveness and ultra-low pricing. Both have faced scrutiny over labour practices, sustainability and regulatory compliance, but remain potent threats to established players.
Turnaround plan: asset-light marketplace and cost cuts
Dan Finley, group chief executive, said the results reflected “the heavy lifting of our multi-year turnaround”, a programme that centres on shifting the business to an asset-light marketplace model, consolidating warehouses, resetting costs and rebuilding every brand on a single proprietary technology platform.
Under the marketplace model, Debenhams Group now hosts more than 1.6 million stock-keeping units (SKUs) from third-party partners. This allows the company to scale GMV growth without taking on proportional inventory risk, a shift Finley described as a “heavy lift” that is now translating into materially better profitability and cash flows.
Warehousing is being consolidated into the group’s automated site in Sheffield, a move expected to deliver annualised savings of around £20 million. The wider cost-reset programme has already cut ongoing fixed costs by roughly £160 million since February 2024, with the target of reducing them to about £100 million in the near term – a cumulative reduction of £200 million since the current management team took over. The group said it remains on track to remove £100 million of costs by next year.
Finley, who was appointed group chief executive in November 2024 after previously running the Debenhams business, said the work was “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 company was renamed Debenhams Group in March 2025, having been known as Boohoo Group. Boohoo originally acquired the Debenhams brand and its online operations for £55 million in January 2021 in a deal that did not include the department store’s physical shops or workforce, leading to significant job losses. The legal name remains Boohoo Group plc, but the rebranding was intended to preserve the heritage of the Debenhams name while aligning the business with its new strategy as a leading online marketplace.
Inditex delivers resilient growth despite geopolitical headwinds
Elsewhere in the fashion sector, Zara owner Inditex posted a 5.8% rise in sales to €8.7 billion (£7.5 billion) during the first quarter of its 2026 financial year, shrugging off concerns linked to the war in the Middle East. Net profit climbed 5.4% to €1.4 billion (£1.21 billion), while earnings before interest, tax, depreciation and amortisation (EBITDA) increased 7.3% to €2.6 billion (£2.24 billion).
The Spanish retail giant said demand for its spring/summer collection was strong, with sales in constant currency rising 8.8%. Gross margin improved by 67 basis points to 61.2%. Momentum continued into the second quarter, with store and online sales jumping 11.5% in constant currency between 1 May and 1 June.
Inditex has been adapting its supply chain to disruptions caused by the Middle East conflict, but the company said the impact on first-quarter results was limited due to timing differences in freight costs. The group continues to optimise its store network, carrying out retail activities in 44 markets during the quarter and ending the period with 5,456 stores worldwide. It plans ordinary capital expenditure of around €2.3 billion in 2026, focused on store upgrades, technology integration and online platform improvements.
