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Debenhams lifts profit forecast, will keep PLT after strong performance
(Sharecast News) - Debenhams Group on Wednesday upgraded profit forecasts, helped by better-than-expected performances across its brands and said it would retain the PrettyLittleThing business. The UK online retailer formerly known as Boohoo last year said it planned to ditch PLT as a part of a plan to cut costs, boost profits and reduce debt.
"Given the success we are seeing with (PLT's) turnaround, the momentum it is building and the substantial opportunity ahead as a fashion-led marketplace, the brand will be retained," Debenhams said in a trading statement.
"We are particularly pleased with the pace and scale of PLT's turnaround and the resulting material improvement in profitability."
Debenhams added it was exploring "significant" licensing opportunities and continued to advance the sale of non-core assets which would materially reduce net debt in the next 12 months.
The company, which rebranded from the Boohoo name last March, now expects adjusted core profit for the 12-month period to February 28 of around £50m, up from its previous forecast of £45m.
"There's been a step-change in performance since shifting PLT to a marketplace model. This model involves allowing third-party brands to sell their goods on its online platform, with PLT taking a cut of any third-party sales made, and banking just that cut as revenue," said Hargreaves Lansdown analyst Aarin Chiekrie.
"The marketplace model brings a host of benefits, allowing sales to scale quickly as more sellers are brought into the fold. The third-party sellers also own the stock and are responsible for picking, packing and shipping orders, removing a host of costs and inventory risk from operations."
"Despite the progress at group level, Debenhams isn't out the woods yet. Retail is a fiercely competitive space, and there are plenty of key customer metrics that need to start trending in the right direction again before investors can get too excited."
Reporting by Frank Prenesti for Sharecast.com
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