Boohoo raises £40m from buyers because it struggles to return to progress

Boohoo Group has raised almost £40million from shareholders as part of efforts to revive the struggling online retailer’s fortunes.

The PrettyLittleThing owner, which is locked in a spat with major shareholder Frasers, revealed it had raised approximately £400,000 from retail investors and another £38.9million from institutional investor subscriptions.

Proceeds from the fundraising will go towards paying a £50million loan due by the end of December and provide ‘additional strategic flexibility to maximise value for all shareholders’, Boohoo said. 

Last week Boohoo revealed a 15 per cent slump in turnover to £619.8million in the six months ending 31 August due to weaker demand for its youth brands.

This contributed to its pre-tax losses quadrupling to £147.3million, as did increased return rates and discounting activity to reduce inventory levels.

Responding to the results, Boohoo’s new chief executive, Dan Finley, acknowledged: ‘There have been challenges and we continue to operate within a volatile market.’

Finley was appointed the new CEO at the start of November in a dramatic snub to Frasers Group, Boohoo’s largest shareholder, which wanted to appoint Mike Ashley.

Frasers has accused the Manchester-based firm’s current management of ‘long-term and continued incompetence’ and presiding over ‘large-scale value destruction’ at the business.

In an open letter last month, it called for Ashley to replace the outgoing John Lyttle as Boohoo’s boss, saying it was the ‘best solution’ to the company’s ‘leadership crisis.’

While Boohoo decided to go with Finley instead, Frasers will have the chance at an investor meeting on 20 December to vote to install Ashley.

Frasers, whose brands include Sports Direct, Flannels, and Evans Cycles, holds a 27 per cent stake in Boohoo, which also owns Karen Millen, Oasis, and Dorothy Perkins.

Boohoo experienced massive growth during the early part of the Covid-19 pandemic as harsh lockdown restrictions on physical stores encouraged Britons to purchase their clothes online.

Its sales subsequently slowed and then declined after those curbs were relaxed, cost-of-living pressures grew, and competition from rivals such as Shein and Temu mounted.

As a result, Boohoo shares have plunged by more than 90 per cent since peaking during the summer of 2020.

They were 0.3 per cent down at 29.9p just before midday on Monday. In its recent fundraising round, Boohoo priced shares at 31 pence each.

Russ Mould, investment director at AJ Bell, said: ‘Retail investors might have been turned off by the stock being priced at a premium to the market value at the time of the fundraise.

‘They could have just placed an order on the market for shares to increase their position without having to pay over the odds.

‘It feels as if Boohoo offered the retail component on the grounds of inclusivity, rather than realistically expecting the general public to pay up for stock.’