Boohoo Group is seeking £35 million from shareholders, a move that could reignite tensions with Mike Ashley’s Frasers Group, the company’s largest stakeholder.
The online fashion retailer, which encompasses brands including Debenhams, Oasis, Warehouse, Pretty Little Thing, and Karen Millen, announced the fundraising on Tuesday, citing the need to reduce debt and support its ongoing turnaround strategy. This strategy includes cost-cutting measures, the sale of a distribution center, and a shift to operating Debenhams as an online marketplace featuring third-party brands.
The capital raise, backed by Boohoo founder Mahmud Kamani, follows a similar £39 million share offering in 2024, as the company navigates a challenging retail landscape marked by increased competition from rivals like Shein and Vinted. Shares in Debenhams fell 16% on Tuesday following the announcement, prompting concerns among investors, according to retail analyst Nick Bubb.
Analysts at Peel Hunt have indicated that Debenhams is nearing the limits of its financial covenants related to a £175 million three-year debt facility. Despite these concerns, Boohoo maintains that all its brands are currently profitable and that it remains on track to achieve underlying group profits of £50 million by the end of February, consistent with prior forecasts.
“The turnaround plan is going apace,” Boohoo stated. “The fourth quarter has continued to see material improvements in the group’s sales trend, alongside the continued removal of significant cost from the business as it is simplified.”
Institutional shareholders have already committed to supporting £24 million of the fundraising, offered at a price of 20p per share – an 11% discount to Monday’s closing price. However, the participation of Frasers Group, holding a nearly 30% stake in Debenhams, remains uncertain.
Frasers Group has previously voiced criticism of Boohoo’s asset disposal plans. In 2024, Mike Ashley attempted to become Boohoo’s chief executive, but the company blocked the proposal from being set to a shareholder vote. Subsequently, shareholders also rejected a bid by Ashley and an associate to join the Boohoo board.
Last month, Debenhams abandoned plans to sell Pretty Little Thing, but the company indicated on Tuesday that it continues to evaluate “non-core asset disposals at best possible value” and the potential for brand licensing as part of its debt reduction efforts. “The board has multiple strategies to de-leverage the group further,” Boohoo stated.
The current situation stems from Ashley’s unsuccessful attempt to acquire the Debenhams brand in 2021, following the department store’s collapse. Frasers Group also opposed the formalization of Boohoo’s name change to Debenhams in March of last year.
