Boohoo Owner Raises £35m, Risking Fresh Clash with Mike Ashley
The parent company of Boohoo and Debenhams is raising £35 million from shareholders in a move that could spark renewed conflict with Sports Direct founder Mike Ashley. The group, which also owns fashion brands Oasis, Warehouse, Pretty Little Thing, and Karen Millen, announced on Tuesday that the fresh capital will be used to reduce debts and finance its ongoing turnaround strategy.
Turnaround Plan and Financial Details
The fundraising initiative, supported by Boohoo founder Mahmud Kamani, comes less than 18 months after the company secured £39 million from shareholders. This latest cash injection aims to bolster efforts to revive sales in a highly competitive market dominated by rivals like Shein and Vinted. The turnaround plan includes aggressive cost-cutting measures, the sale of a distribution centre, and operating Debenhams as an online marketplace for third-party brands.
Despite a nearly 9% drop in share price on Tuesday morning, Debenhams—which rebranded from Boohoo last year—reported that all its brands are now trading profitably. The company remains on track to achieve underlying group profits of £50 million for the year ending in February, aligning with previous guidance. In a statement, the group emphasised that the turnaround is progressing swiftly, with significant improvements in sales trends and continued cost reductions as the business is simplified.
Shareholder Support and Potential Conflict
Institutional shareholders have already indicated support for £24 million of the fundraising, which is priced at 20p per share—an 11% discount to Monday's closing price. However, it remains uncertain whether Mike Ashley's Frasers Group, which holds a near 30% stake as Debenhams' largest shareholder, will back the cash call. Frasers has previously criticised the group's asset disposal plans, and Ashley was blocked from becoming Boohoo's chief executive in 2024, with shareholders later preventing him and an associate from joining the board.
Analysts at Peel Hunt noted that Debenhams is "bumping up against covenants" on a three-year £175 million debt facility, highlighting the financial pressures facing the company. Independent retail analyst Nick Bubb commented that investors may be dismayed by the group's financial situation, reflecting broader concerns in the retail sector.
Strategic Moves and Historical Tensions
The board has outlined multiple strategies to further reduce leverage, including considering non-core asset disposals at the best possible value and licensing brands. Last month, Debenhams abandoned plans to sell Pretty Little Thing but continues to explore other options to strengthen its balance sheet.
This fundraising effort reignites long-standing tensions with Mike Ashley, who lost out to Boohoo in the acquisition of the Debenhams brand following the department store's collapse in 2021. In March last year, Frasers voted against formalising the group's name change from Boohoo to Debenhams, underscoring the ongoing friction between the parties. As the retail industry navigates intense competition and economic challenges, this development marks a critical juncture for Debenhams' future and its relationship with key stakeholders.
