“Debenhams is back,” proclaimed the online retailing group formerly known as Boohoo. Unfortunately, its fast-fashion brands – not just Boohoo itself but also Pretty Little Thing and MAN – haven’t gone away. All are struggling badly.
Since the latter collection still represents three-quarters of group revenues, new chief executive Dan Finley’s upbeat talk about an exciting future feels more than a little premature. The main market-moving news in the strategy rejig and trading update was another downgrade to the City’s profit expectations alongside a thumping £40m charge for writing down surplus stock at what are now badged as the “youth brands”. The shares fell 4%.
The resuscitation operation on Debenhams, now in online-only form obviously, also seems to be more a work-in-progress rather than a definitive “we’re back” moment. Pushing a “marketplace” platform model – selling other retailers’ brands, in other words – was an obvious move since all the big names in clothing, from Next to Marks & Spencer to John Lewis, have ramped up activity in that arena. The stock-lite and capital-lite features obviously also hold appeal for a group that still has too much debt.
But 10% growth for Debenhams is not a shoot-the-lights-out performance and the open question is the true size of the outside third-party “marketplace” element. How much of the turnover is coming from in-house labels Wallis, Coast, Oasis, Dorothy Perkins and Warehouse? Jefferies’ analyst Andrew Wade reckons the pure platform contribution is “diminutive” – strip out internal brands and beauty products from Debs’ revenues of £205m and he thinks it could be as little as £50m-£60m. Fair point: the partners may be enjoying “strong growth” on the platform, as the group says, but from what level?
Meanwhile, revenues at the fast-fashion brands were down by almost a quarter to £947m and it’s hard to escape the impression that Boohoo has simply had its day in the sun. From one direction, industry giants Shein and Temu intrude; from the other, websites for secondhand goods such as Vinted are a coming force.
The group’s solution, again, is to adopt a marketplace model for its “youth brands” but it hasn’t happened yet. In any case, Shein itself is talking about adding a marketplace and it clearly has more dollars to throw at its project. If a quick sale of Boohoo etc is possible, it looks like an easier option. The views of Mike Ashley, 27% shareholder and presumably still grumpy, are awaited.
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None of which is to minimise Finley’s turnaround efforts. An unneeded US warehouse has been closed, the Manchester-based group has sold its London office, and there’s been an attack on costs. It all helps. But he was pushing the limits of credibility in declaring his confidence that “our best days are ahead of us.” Come on, the best days for Boohoo were when the Covid lockdown turned everyone into an online shopper, the brand was still vaguely buzzy and the share price hit 400p. You can change the corporate name, but the shares stand at 26p for a reason.
