Manchester-based retailer Debenhams-Boohoo said it has completed the sublease of its distribution centre in the United States to ID Logistics, a global third-party logistics (3PL) operator.
The 1.1 million sq. ft. distribution centre in Elizabethtown, Pennsylvania, opened in August 2023 and was operational for 15 months. The facility is a manual, non-automated operation.
The group ceased operations on November 11, 2024, with fulfilment of US orders returning to the UK.
“To date the group has incurred approximately $124m of costs at the site, covering rent, operating costs and capital investment,” said Debenhams-Boohoo.
“The facility, which is surplus to the group’s operational requirements, carries approximately 8.5 years remaining on the lease term, representing approximately $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.
“The Sublease materially reduces the group’s future cash obligations while securing a long-term occupier for the site, with ID Logistics expected to commence occupation on 1 August 2026 until the end of the Group’s lease …
“The transaction has resulted in an unaudited non-cash exceptional credit of approximately £40m to the income statement relating to the recognition of an asset on the balance sheet for the future sublease payments, which (subject to audit confirmation) will be reflected in the Group’s H1 results.
“As previously guided in the Group’s Q1 trading update, the Sublease represents a key step in reducing the Group’s future annual lease costs.
“The Group’s lease costs in the current year will be £13m, which will further reduce to £8m in FY28 and £6m in FY29 as the benefits of the $9.5m average annual rent income under the Sublease are fully realised.
“The £6m ongoing lease costs will include the fully automated Sheffield warehouse, the Manchester head office, as well as a small London footprint.
“Other costs of approximately $20m associated with the Group’s lease obligations will be covered under the terms of the Sublease.”
Debenhams CEO Dan Finley said: “This is a significant development. The US DC was a major contributor to the challenges that the company has faced.
“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.”