Debenhams raises £40m in oversubscribed funding round

News analysis: What’s behind the healthy appetite for Debenhams?

Last week, Debenhams raised £40m in a substantially oversubscribed funding round to boost its continued turnaround strategy.

The fundraise surpassed its £35m target, after high investor demand pushed the online retailer to upscale. Now, the group expects to receive net proceeds of approximately £38.7m after expenses, and new shares began trading on the AIM at 8:00 a.m. yesterday.

As the retail sector struggles amid the ongoing cost of living crisis, why are investors so keen on Debenhams?

For one, investors have reason to believe that its turnaround plan, kickstarted in May 2019, is working. In late November last year, the company revealed it had reduced its statutory loss after tax to £3.4m for the six months to 31 August 2025, down from £126.7m a year earlier. This came in spite of a 23% decrease in revenue year-on-year to £296.9m for the period in H126, while gross profit dropped 24% to £157.2m.

Nonetheless, adjusted EBITDA climbed 5% to £20m, with operating costs reduced by 27% to £137.2m as management charged ahead with its cost-cutting and marketplace expansion plans. The Debenhams brand itself came out on top, with gross merchandise value up 20% on the same period last year and EBITDA at a 50% increase. Investors are likely confident a positive outlook will persist following Debenhams anticipated results for the financial year ending 28 February 2026.

At the same time, financiers were offered shares at a 5% discount to the 17 February closing price, equating to an issue price of 18p. The share price was 10% lower than the 20p placing proposed by company directors Dan Finley, Mahmud Kamani and Iain McDonald when press speculation pushed them to announce the fundraise, a move that drove down the price and jeopardised the chances of a 20p raise.

Finally, shareholders are likely drawn to Debenhams’ asset-light model. After entering into administration at the end of 2020, the company boarded up its last few stores in mid-May 2021, bringing its 243-year tenure on the UK high street to an end. Now a digital marketplace, Debenhams no longer holds most of its stock and takes commission from third party-brands that sell on its platform such as fast fashion brands Karen Millen, booMAN and PrettyLittleThing, eliminating the risk of unsold inventory driving up warehousing and labour costs.

However, the raising round was also of note due to its spotlight on ongoing tension between Boohoo founder Mahmud Kamani and Frasers Group and creator Mike Ashley. After Kamani had promised last Tuesday (17 February) that he would purchase new shares, purchasing 44 million for £8m, Frasers moved to buy 59 million for £11.21m. Given Frasers’ history of organising a Debenhams boardroom coup in a bid to remove Kamani off the board and its stubbornness when it comes to its transition from branding as Boohoo, it is likely Frasers’ move intended to water down Kamani’s ownership of Debenhams.

Debenhams’ latest statement on the fundraise has revealed a broadly positive outlook, with the group noting the move will “deliver an improved capital structure” and offer it “greater financial flexibility to execute our turnaround strategy and deliver value for all shareholders”. However, the group may need to continue to prove its asset-light model cuts costs and meets the needs of the fast fashion world, and protect itself from in-fighting.