First-half gross merchandise value (total platform sales), before returns, rose 1.8% to £864mn. That was driven by double-digit growth at Debenhams.
Adjusted cash profit (EBITDA) grew at a faster pace of 13.9% to £24mn, because of improved margins and cost savings.
Net debt fell 8.3% to £102mn at the end of the period, with management expecting it to be ‘negligible’ by year end following recent disposals.
Management reiterated full-year guidance for double-digit growth in adjusted cash profit to at least £59mn and expects free cash flow to turn positive this year.
The shares were up 1.6% in early trading.
Our view
The fast-fashion company, which now refers to itself as Debenhams, saw profitability improve in the first half. Alongside recent disposals that have helped to reduce debt and improve free cash flow, the group has taken a significant step in its turnaround plans.
Momentum in its largest division, Debenhams, continues to impress, thanks to its marketplace model. This involves allowing third-party brands to sell their goods on the Debenhams online platform, with the group taking a cut of any third-party sales made and banking just that cut as revenue.
The marketplace model brings a host of benefits, allowing sales to scale quickly as more sellers are brought into the fold. Third-party sellers own the inventory and handle fulfilment, removing costs and inventory risk from Boohoo's operations. That has had a significant positive impact on the group’s profitability so far, and more cost benefits are expected this year.
This asset-light marketplace model has become the blueprint for the turnaround of its other struggling divisions. For context, despite contributing only about 40% of group sales in 2026, Debenhams brought in about two-thirds of the total cash profit (EBITDA).
Although gross merchandise value (total platform sales) has returned to positive territory in the first half, future success depends delivering stronger growth across the group. Breathing life back into the Youth Brands division (which includes PrettyLittleThing, boohoo and Karen Millen) remains the main challenge. With their strong social media following, these brands have the potential to be great assets. But unlocking that potential will require targeted investment in product, marketing and customer engagement.
Alongside strengthening the balance sheet, recent asset disposals are expected to drive meaningful cash savings in interest and lease costs over the coming years. That provides additional support for profitability as management focuses on returning the group's brands to sustainable growth.
Tensions with its largest shareholder (Frasers) remain high, causing Boohoo to push through a management compensation package without shareholder approval. It’s also the reason that the group’s name change to Debenhams hasn’t been made official across the board. Alongside a murky track record of labour exploitation, investors should be aware of elevated corporate governance risks.
Despite the pivot in strategy, our concerns about Boohoo haven’t disappeared. The valuation has recovered strongly, reflecting the progress made so far, but there’s still scope for further upside if management can deliver. From here we'll need to see further improvements in customer metrics, sales and profitability before becoming more confident in the investment case.
Environmental, social and governance (ESG) risk
The retail industry is low/medium in terms of ESG risk but varies by subsector. Online retailers are the most exposed, as are companies based in the Asia-Pacific region. The growing demand for transparency and accountability means that human rights and environmental risks within supply chains have become a key risk driver. The quality and safety of products as well as their impact on society and the environment are also important considerations.
According to Sustainalytics, Boohoo’s management of ESG risk is average.
The company's disclosure is poor, signalling a lack of accountability to investors and the public. Governance has been a longstanding issue, with the most recent development on executive pay (discussed above) highlighting some of the risks. It has some initiatives to manage risks related to material ESG issues; however, the company lacks policies and programmes in key areas. Furthermore, the company has been involved in numerous significant ESG-related controversies.
Boohoo key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember that yields are variable and not a reliable indicator of future income. Keep in mind that key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.