boohoo group plc (DEBS) Earnings Call Transcript & Summary

Good morning. My name is Dan Finley. I'm the Chief Executive of Debenhams Group. I'm day 130 in role. And excitingly, today is day 1 of our new beginnings as we go forward as Debenhams Group. Debenhams is back. The 2 things that I want to talk to you about today. Firstly, to provide a deep dive into our Debenhams business; and secondly, to share my vision for our future going forward. Debenhams has a very proud history, and I'm privileged to be part of that. 247 years ago, Debenhams was founded in 1778. That's 11 years before America's first President. That's 24 years before the discovery of electric lighting. It's 108 years before the invention of the motor car. And it's 205 years before the birth of the Internet. We have William Debenham to thank for this. He was a pioneer, the pioneer of multi-branded retailing, the pioneer of the department store concept, the pioneer of the British High Street. And ultimately, what William Debenham founded became an iconic, much-loved British heritage brand. But difficult times fell upon Debenhams, and it was time for change and new beginnings with new ownership, new leadership and new vision. Our new Debenhams is bigger, better and bolder. Today, we are Debenhams, Britain's online department store. And let me share with you a little bit more about my vision and philosophy as I approach the Debenhams opportunity. I want Debenhams to be to retail what Spotify is to music. I want to offer the consumer ultimate choice and the ultimate selection. I want to do that in a curated and personalized way that makes us the go-to destination for our consumer. I'm delighted today that our Debenhams ecosystem has more than 15,000 brands in it, and it's growing every single day. We're proud to work with such a brilliant selection of brands. Yves Saint Laurent, Estee Lauder, Clarence, Calvin Klein, BOSS, Gant, Altra, Castor, Valentino. We add more brands to our portfolio every single day. And let me share a little more about our approach. We are principally a marketplace model. That means that we are stockless. Our marketplace business, we take no inventory risk on. The responsibility for buying, storing, picking and packing the products that we sell through our marketplace business rests with our partner. And the attractiveness of the economics of the marketplace model is that we earn 100% gross margin on each marketplace product that we sell. And the model is working capital positive as we receive the monies from our consumer a number of weeks before we have to remit those monies minus our commission to our partners. And I believe in what I call collaborative commerce. We bring millions of consumers together with thousands of partners through our Debenhams platform. Our partners and we at Debenhams are focused on delighting our customers. We want to showcase our partner brands at their very best. And by delighting our customers showcasing the great brands and products of our partners, we drive sales through our Debenhams platform, which is a win for the consumer, a win for our partner and ultimately a win for Debenhams. And this collaborative commerce approach is working very well with our consumers and exceptionally well with our partners. Because ultimately, we want to deliver growth to our partners in a challenging economic environment and a challenging retail environment, Debenhams delivers growth for our partners. That growth is in excess of 50% over the course of the last 12 months when I look at our partners that have been trading on the platform for over 24 months, an exceptional level of growth in a challenging retail environment, which makes Debenhams an attractive destination, both for consumers and partners. And of course, Debenhams is home to much loved and well-known labels that have been acquired by the group: Coast, Wallis, MissPap, Dorothy Perkins, Principles, Nasty Gal, Oasis, Warehouse, and Burton, brands that our consumers love and that we have rescued, turned around and bring to our consumer every single day through our debenhams.com platform, through our direct-to-consumer websites and through the partners that we sell our brands through to. Ultimately, we're about delivering results. Debenhams is a high-growth business. In FY '25, Debenhams generated GBP 654 million of GMV. In a challenging economic and retail environment, that is a 43% increase on FY '24, which builds on a 63% increase on FY '23 and 113% increase on FY '22. This has been a multiyear turnaround at Debenhams. EBITDA of GBP 25 million in FY '25 is a significant transformation from the circa GBP 15 million losses that I inherited in FY '22. I'm pleased to report very strong EBITDA margins in our Debenhams business. If I look at our marketplace, the EBITDA margin in FY '25 is 27%. If I look in our fashion business, the collection of much loved labels that have now been incorporated into Debenhams, they've been turned around, the losses have been stopped, and they now make a 7% EBITDA margin. Our Debenhams business model is capital light. When I look at our CapEx spend in FY '25, it was just GBP 1.2 million. And Debenhams is highly cash generative. Our operating cash flows reached GBP 40 million in FY '25, a significant improvement on minus GBP 23 million in FY '22. The marketplace-led business model generates significant cash. What's most exciting about Debenhams is not the progress that we've made over the last few years, but the incredible and significant opportunities that I believe lie ahead. The flywheel is such an incredible opportunity for Debenhams as the network effects begin to take effect. We offer more choice to our consumers by bringing more partners and more brands into the ecosystem. That greater choice attracts more and more consumers to the Debenhams platform. And more brands and better brands with more consumers and more frequent consumers combine to drive greater sales and greater growth. Those greater sales and higher rates of growth for our brands and partners, in turn, attract more brands and partners into our ecosystem. I'm super excited about the opportunities ahead. We launched Retail Media on Debenhams this year. It's an incredible opportunity, whereby we generate significant margins by selling advertising and media services through our Debenhams ecosystem to our brands, partners and select third parties. I'm delighted with the adoption of our retail media solution through our partner network and encouraged by the early results and successes that we have seen. And I believe that retail media through our Debenhams platform will be a significant contributor to our future profitability. Delivered by Debenhams leverages our state-of-the-art fulfillment center in Sheffield. It enables us to store, pick, pack and deliver products from our brands and partners, leveraging the significant investment that we've made in a state-of-the-art and best-in-class distribution center. We make a margin on every product that we handle. I'm delighted that we've gone live this week with our first partner for Delivered and Fulfilled by Debenhams. I'm delighted to announce today the launch of Debenham's Pay Plus, our financial services business. We believe that is highly complementary to our online department store model and is a significant potential profitability driver as we move forward. We see an opportunity to offer more choice to our consumers in how they pay on Debenhams. In turn, we can invest expected financial services income in pricing, promotion and our consumer proposition to drive greater order frequency and higher lifetime value for our Debenhams consumers. And there's a huge opportunity with Debenhams to drive greater consideration. Debenhams benefits from huge brand awareness, but the real opportunity is in doubling the consideration and 10x-ing the intention to buy rates. If I look at the levels of consideration and intention to buy that our competitor sets achieve, we have significant headroom for growth to drive more consumers into the Debenhams ecosystem. Debenhams is perhaps most famous for Designers at Debenhams. It was the inventor of designer collaborations, the pioneer, some might say, of influencer marketing. Designers at Debenhams was much loved by the British consumer. I'm delighted to announce that this autumn/winter, Designers at Debenhams is back. I see significant new partnership opportunities for our brands as we extend the presence of our brands beyond the Debenhams and group ecosystem and sell on more platforms and more marketplaces in more retail destinations across the world. And to recap, at Debenhams, we've seen a highly successful multiyear turnaround. We've proven out a new business model as we've transformed an iconic British heritage brand. And I see huge opportunity ahead for Debenhams. In Debenhams, we have a success blueprint that can be applied to the turnaround of the rest of our group. The ingredients of this blueprint are an experienced team, a highly attractive business model, proprietary technology that underpins our business model, proven economics and high double-digit EBITDA margins and frankly, unlimited opportunity. I'm super proud of the journey that we've been on at Debenhams. But now we start our new beginnings. We've undertaken significant change since the 1st of November when I was appointed CEO. We've appointed a new Non-Executive Chairman in Tim Morris, who has more than 25 years of retail and operating experience. Now is time for us to leverage the Debenhams success blueprint and roll that out to aid the turnaround of the rest of our group. Today, I'm delighted that we've announced the rebirth of our group as Debenhams Group, a marketplace-led business that leverages our proven Debenhams model and that is powered by our proprietary Debenhams technology. We have a new mission to connect our community with brands they love, a new vision, fashion, beauty, lifestyle for everyone and a new set of values, be brave, be creative, be a community. As we go forward as Debenhams Group, we'll be announcing in the coming weeks and months a new set of ESG commitments that underpin our group going forward. Ahead of this, I'm delighted to announce 4 new partnerships today. With Segura, the global leaders in supply chain visibility as we build on the progress that we've made in recent years, but go even further to provide transparency in our end-to-end supply chain. With Pennies, the micro-donation services as we enable our consumers and we as a business and our partners to make a significant contribution to social change. With the Carbon Trust to develop a robust net zero transition plan. And with the Graduate Fashion Foundation to invest in future fashion talent in the United Kingdom. As I look forward, I'm incredibly excited by the opportunities that I see ahead and laser focused on creating value for all shareholders. And I see an exciting medium-term opportunity. Debenhams, the online department store in the medium term is a multibillion pound GMV business,with a circa 20% EBITDA margin. Karen Millen is a global lifestyle brand that can achieve double-digit EBITDA margins. And our Youth brands become fashion-led marketplaces with high single-digit EBITDA margins. Debenhams is back. I'm really proud of the progress that we've made turning around Debenhams. Debenhams group is sharply focused on creating value for all shareholders. I look forward to updating you all on the journey ahead. And finally, I'd like to thank our colleagues around the world for all of the great work, help and support in our ongoing transformation.