Debenhams Group has potentially saved itself a hefty $100m of future debt with the sublease of boohoo’s former US distribution centre.
The 1.1 million sq. ft distribution centre in Elizabethtown, Pennsylvania, opened in August 2023 and was operational for just 15 months.
A manual, non-automated operation, the group ceased operations there in November 2024, with fulfilment of US orders shifting back to the UK.
The group, now Debenhams but formerly boohoo, said it has incurred approximately $124 million of costs at the site, made up mostly of rent, operating costs and capital investment.
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The facility has approximately 8.5 years remaining on the lease, representing around $100m of future lease and holding costs. Mitigating the group’s liability has been a strategic priority as part of its transition to an “asset-light operating model,” it said.
CEO Dan Finley described the facility as a “major contributor to challenges the company has faced.” The challenge has thus been significantly mitigated by the site’s sublet to ID Logistics, a global third-party logistics operator.
“This is a significant development,” said Finley. “One of my first actions in role was to close the US DC and the sublease of it mitigates a material future liability. Our turnaround strategy continues at pace.”
The transaction has resulted in a non-cash exceptional credit of approximately £40m to the firm’s income statement relating to the recognition of an asset on the balance sheet for the future sublease payments, which will be reflected in the group’s H1 results.
The group’s lease costs in the current year will be £13m, which is expected to further reduce to £8m in FY28 and £6m in FY29 as the benefits of the $9.5m average annual rental income under the sublease are fully realised and taken into account.
The £6m ongoing lease costs will include the fully automated Sheffield warehouse, the Manchester head office, and the company’s small operation in London. Other costs of approximately $20m associated with the group’s lease obligations will be covered under the terms of the sublease.
