Boohoo Group has launched a £35m share placement to strengthen its balance sheet and support its long-running turnaround, sending its shares down 10 per cent in early trading.
The Manchester-based fast-fashion retailer, which rebranded as Debenhams Group last year to reflect that label's strong performance, said the equity raise would provide additional liquidity and help it achieve what it described as an “optimal capital structure.”
Priced at 20p per share, the placement has already received token support of more than £24m from existing shareholders including co-founder Mahmoud Kamani, chief executive Dan Finlay and director Ian MacDonald. The company said it will engage institutional investors in the coming days to secure further commitments.
Boohoo, founded in 2006 by Kamani and Carol Kane, rose to prominence by selling low-price, on-trend fashion directly to consumers online. It was valued at several billion pounds during the pandemic boom, but has since struggled amid supply chain disputes and shareholder disputes, as well as increasing competition from rivals such as Shein and Teemu.
Over the past year, the group's shares have fallen almost 22 per cent to just over 20p, reflecting concerns over its financial position and the pace of its turnaround.
The company confirmed that it is in advanced discussions with its lending syndicate to amend loan covenants and increase financial flexibility. Any revised terms will be contingent on the successful completion of the capital raising.
Retail analyst Nick Bubb said the fundraise may add to investor concerns that Boohoo's turnaround is proving more cash-intensive than previously expected. He said the company raised about £39 million in November 2024 at 31p per share, highlighting the impact of dilution for shareholders.
Boohoo said it expects adjusted earnings before interest, tax, depreciation and amortization (Ebitda) of about £50 million for the year to February 28, up from earlier guidance of £45 million. It is aiming to almost double the net debt to EBITDA ratio by the 2027 financial year, falling below one by the end of that year.
Investment bank Peel Hunt has raised its full-year EBITDA forecast to £50m, suggesting the group could return to positive earnings for the first time since 2022.
Boohoo's recovery efforts have been complicated by tensions with Frasers Group, which owns a 27 percent stake. The owner of Sports Direct, controlled by Mike Ashley, has repeatedly clashed with Boohoo's board, including over its corporate rebranding strategy.
Last year Frasers blocked efforts to formally rename holding company Debenhams Group PLC, despite an operating brand change on the London Stock Exchange and a ticker switch to DEBS.
The dispute mirrors similar tensions between Frasers and Asos, in which it also has a significant stake.
For Boohoo, the latest cash call underlines the fragility of its turnaround as it grapples with fierce online competition, operational constraints and investor skepticism in a crowded fast-fashion market.
Amy Ingham
Amy is a newly qualified journalist specializing in business journalism with responsibility for news content at Business Matters, the UK's largest print and online source of current business news.