Boohoo Shares Surge on Strong Trading Update, Raised Guidance

Shares of Boohoo Group (Debenhams Group) (LON: DEBS) are trading higher on Monday morning after the company released a trading update for the year ended February 28, 2026, showcasing significant improvements in profitability and debt reduction.

The report exceeded previous guidance, fueling optimism about the company’s ongoing turnaround strategy.

Debenhams Group announced Adjusted EBITDA of £53 million for FY26, a 36% increase year-over-year. This figure comfortably surpasses the previously upgraded guidance issued on January 28, 2026. The second half of the year was particularly strong, with Adjusted EBITDA increasing by 76%.

The company also raised its guidance for FY27, anticipating double-digit percentage growth on the higher £53 million FY26 Adjusted EBITDA base. Net debt has fallen below 2x Adjusted EBITDA, and the company expects it to reach under 1x Adjusted EBITDA by the end of FY27.

This improvement is attributed to the company’s shift toward a “stock-lite, capital-lite, highly profitable marketplace” model. Management has successfully reset the cost base, completed warehouse consolidation, delivered technology re-platforming, rightsized the stock base, and exited most onerous contracts.

Driver Breakdown:

Cost Optimization: Fixed costs were reduced to £119 million, £11 million below the previously guided £130 million, and significantly lower than the £175 million in FY25. The company is on track to achieve its target of £100 million in FY27.

Marketplace Growth: The transition to an asset-lite marketplace model is central to the turnaround plan, allowing the company to leverage increased momentum and maximize value from deleveraging options.

Debt Reduction: A £40 million fundraise in February 2026 contributed to the reduction of net debt to £90 million at the end of February.

AskTraders Takeaway: This report signals a strong positive trend for Debenhams Group. The market is likely reacting favorably to the improved profitability, reduced debt, and increased guidance. Expect continued volatility as the company executes its turnaround strategy.

CEO Dan Finley stated, “Our multi-year turnaround strategy continues at pace… Our pivot to the stock-lite, capital-lite, highly profitable marketplace is working,” reinforcing the company’s commitment to the new business model.

The company anticipates significant improvements in cash flow from operating activities due to materially lower exceptional costs. Lease costs are expected to decrease from £18 million in FY26 to approximately £13 million in FY27, and further to around £6 million upon exiting the vacant US property lease. Capital expenditure is also projected to decline from £16 million in FY26 to approximately £8 million in FY27, further enhancing cash generation.

Interest costs are projected to decrease as non-core property assets are disposed of and the business deleverages. Working capital is expected to be marginally cash flow positive in FY26, with further reductions anticipated as the marketplace continues to grow.

Depreciation in FY27 is expected to fall from approximately £59 million in FY26 to around £20 million, reflecting the lower asset base post write-offs related to the transformation.

Analyst Summary: Bull and Bear Cases