Boohoo Source: Liquidity Not an Issue
With 290 million pounds ($366.2 million) of liquidity, reports of a Boohoo liquidity crunch or financial squeeze might be a bit premature, at least for now.
Some Boohoo lenders were said to be giving the fashion e-tailer a hard time when it tried to extend its repayment deadline beyond March 2025 on a 325 million pound ($$410.2 million) revolving credit facility. But a source familiar with those talks shut that down, telling Sourcing Journal on Friday that Boohoo does not have a repayment problem.
More from Sourcing Journal
UK’s The Telegraph first reported that Boohoo got the nod from six banks giving it a one-year extension until March 2026 to repay a 250 million pound ($315.5 million) component of the facility. The problem was centered on banks behind 75 million pounds ($94.7 million) of the facility insisting that Boohoo adhere to the March 2025 repayment date. Boohoo reportedly had borrowed the entire amount. Had Boohoo received an extension of the repayment deadline for the 75 million pounds owed, it certainly would have gotten a lot more breathing room given the longer period of time for repayment.
So, what’s really going on here? With 290 million pounds of liquidity, it seems that paying back 75 million pounds wouldn’t be a hardship. The Boohoo source said that the revolving credit facility was extended in July 2023. While the fashion company has access to a smaller line of credit beginning in March 2025, this source emphasized that Boohoo can manage the business with the smaller facility.
Boohoo’s been looking at all aspects of operations, from how much inventory it needs for the business to rethinking locations of its distribution centers. It is set to shutter its Daventry distribution center, located in the village of Crick in England’s Northamptonshire. And the company is rumored to be close to closing down its Leicester factory, about a 30-minute drive north of Crick, in another move to streamline operations. In the last year or so, the company has invested in retrofitting its Sheffield site, and opened a warehouse in Pennsylvania to improved the fulfillment of U.S. orders. But it’s also seen some senior members of its team head for the exit.
And while it’s “business as usual” at Boohoo, it could be making these cuts to get its house in order sooner than later knowing it needs to streamline operations because of the reduced credit facility down the road.
Last October, Boohoo cut its earnings and revenue expectations, noting that full-year sales could drop 12 to 18 percent. And that’s despite lowering prices to try to grab more marketshare. But inflation has been a thorny problem for its customers, and the company has been facing rising freight and energy costs to boot. And its also facing stiffer competition from fast-fashion rival Shein, as well as newcomer Temu. Boohoo, like its U.K. rival Asos, has been having a hard time adjusting to a changing post-COVID marketplace that saw consumers moving back to buying at brick-and-mortar retailers after months surfing online during the pandemic.
Moreover, the 290 million pounds of liquidity was as of October 2023, when the company last posted interim results for the first half. For now, Boohoo said on Jan. 23 that sales thus far remained “in line with market expectations.” But it also didn’t offer any good news about revenue, particularly over the holiday period. The expectation now is that the sales decline was in line with October’s guidance. The key will be what Boohoo says about sales and its balance sheet when it posts results in May for the year ended Feb. 28, 2024, not to mention an update on how much of that liquidity it has retained.
Meanwhile, Shein and Frasers Group, Boohoo’s largest shareholder, are said to be watching and waiting. Shein rumblings has it interested in its British rival as a possible acquisition. The Mike Ashley-controlled Frasers’ ongoing share purchases of Boohoo and Asos has spurred speculation that he could be looking to merge the two and then sell to Shein, or takeover Boohoo and then ink a collaboration of some kind with the China behemoth.
