boohoo group plc has mitigated a “future liability” with the sublease of its former US distribution centre.
The 1.1 million sq. ft distribution centre in Elizabethtown, Pennsylvania, opened in August 2023 and was operational for approximately 15 months.
A manual, non-automated operation, the group ceased operations there on 11th November 2024, with fulfilment of US orders returning to the UK.
The listed retail group, which trades as Debenhams Group, said it has incurred approximately $124 million of costs at the site, covering rent, operating costs and capital investment.
The facility 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, it said.
CEO Dan Finley described the facility as a “major contributor to challenges the company has faced”. It has been 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.”
ID Logistics is expected to commence occupation on 1st August 2026 until the end of the group’s lease.
The transaction has resulted in a 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 will be reflected in the group’s H1 results.
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.