Boohoo seeks £39m lifeline amid surging losses

The funds will help ease its debt burden and offer “strategic flexibility”

• Pramod Thomas
• 14 November, 2024

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By: Pramod Thomas

ONLINE fashion retailer Boohoo is preparing to raise £39.3 million after reporting a steep rise in pre-tax losses, which have more than tripled amid competitive and financial pressures.

The company plans to generate these funds through a combination of new share placements, subscription agreements, and a retail offer, all priced at 31p per share, a slight premium over the previous closing price.

According to Boohoo, the funds will help ease its debt burden and offer “strategic flexibility” as it pursues its recovery strategy.

At the same time, Boohoo is also navigating a power struggle with Mike Ashley’s Frasers Group, its largest shareholder, which has amassed a 27 per cent stake in the firm.

Ashley’s firm, which has called for a special shareholder meeting in December, is urging other investors to back its proposal to add two of its own directors to Boohoo’s board—founder Mike Ashley and restructuring expert Mike Lennon.

It has also pushed for greater control over Boohoo’s asset management, specifically calling for shareholder consent before any significant asset sales. The retailer contends that Frasers’ demands could disrupt its turnaround plans, potentially with the intent of acquiring Boohoo assets at a reduced value.

Tensions between Boohoo and Frasers escalated last month when Frasers overtook Boohoo founder and chairman Mahmud Kamani as the single largest shareholder.

Kamani, who co-founded Boohoo and maintains a 15.5 per cent stake alongside his son Umar, has publicly denied any intention to repurchase Boohoo or any of its subsidiaries at a discount. This statement triggered restrictions under the City takeover code, preventing Kamani from making any further buyout offer for the next six months.

Boohoo’s leadership has stated its opposition to Frasers’ influence, describing Frasers’ intentions as self-serving and disruptive. In an official letter to shareholders, Boohoo advised investors to question Frasers’ motives, suggesting that Ashley’s team is primarily interested in extracting short-term value rather than ensuring the long-term health of Boohoo’s business.

Boohoo’s board further highlighted Frasers’ history of exerting control over companies in which it holds a significant stake, citing its controversial handling of Studio Retail Group. There, Frasers, with a 30 per cent stake, demanded significant board influence, ultimately acquiring Studio for £1 after it entered administration, a move that led to losses for other shareholders.

In its most recent interim results for the six months ending in August, Boohoo reported a 15 per cent drop in group revenues, down to £619.8 million, with pre-tax losses swelling from £36.6m to £147.3m.

The company attributes much of this downturn to fierce competition from ultra-fast fashion giants like Shein, as well as supply chain disruptions and inflationary pressures that have squeezed profit margins.

Despite these obstacles, Boohoo’s board remains committed to its own business plan under the leadership of new CEO Dan Finley, who previously headed the department store chain Debenhams, now owned by Boohoo.