- Solid momentum in Debenhams’ recovery story
- Group formerly known as Boohoo decides not to sell PrettyLittleThing brand
- Pets at Home shares jump as life hasn’t got dramatically worse ahead of senior management change
- Card Factory confirms poor festive period as question marks remain over long-term growth plans
Dan Coatsworth, head of markets at AJ Bell, comments:
DEBENHAMS (AKA BOOHOO)
“One swallow doesn’t make a summer but an upgrade to Debenhams’ earnings guidance gives investors hope and builds on well-received results last November.
“During the pandemic online retailers focused on growth but factored in little protection for the increase in costs coming out of Covid and lockdowns, particularly as people became more active in returning unwanted clothing.
“It makes sense that Debenhams is now focusing on profitability and an improvement in a balance sheet that still bears the scars of the post-Covid period. Some of the reduction in borrowings will be achieved by disposals, although the company has done an about-turn on the sale of PrettyLittleThing.
“Whether this genuinely is a result of an improved performance for this brand or just because of the lack of a willing buyer is open to question. The company’s youth offering seems to be doing well alongside the Debenhams brand, and the group is going to run with it.
“The focus on growing earnings and avoiding unprofitable sales on its range of clothing means revenue remains in a retrenchment phase. The market is likely to make some allowances for this situation in the short term but ultimately will want to see a return to growth at some point.”
PETS AT HOME
“Just as a dog gets excited at the prospect of ‘walkies’, the tail is finally wagging on Pets at Home’s shares. On the face it, a 0.7% decline in third quarter like-for-like sales is hardly cause for celebration. The market likes the result because trading hasn’t dramatically worsened.
“Expectations for Pets at Home have been rock-bottom since a series of profit warnings over the past year. The company has been left behind after failing to fight off competition, and it’s now in turnaround mode. Pets at Home appears to be steadying the ship, and that’s fantastic news for investors.
“It’s a good starting point for the incoming new leadership team in the spring. The last thing a new CEO and CFO want to do is spend their first few months wading through a mess. If the business has stabilised, they can have a clearer focus on how to resume growth.”
CARD FACTORY
“Card Factory had already delivered a painful message pre-Christmas when it blamed negative consumer confidence and patchy high street conditions for depressing earnings. The rest of the festive season continued in this fashion, meaning it goes into 2026 from a position of weakness.
“The market will now have to wait until April for an update on longer-term strategic plans for the business.
“In its defence, Card Factory has shown resilience in recent years despite a general downturn in sending letters and cards by post. It has been pushing hard on extras like balloons and gifts, while also keeping prices as low as possible on cards as it plays the volume game.
“It is a profitable business and a mainstay of UK retail. What’s uncertain is by how much profits can grow in the future. Card Factory is having to work hard just to stand still, and it might need more radical ideas if it wants to become a bigger player.”
