Asos is raising £80m from shareholders and borrowing £275m from Bantry Bay Capital, the specialist lender which recently bailed out troubled retailers Superdry and Matalan, as it struggles to secure a turnaround after falling nearly £300m into the red.
The online fashion specialist said it had raised the funds to give it the “financial headroom” to improve shoppers’ experience and return to profitability within a year by simplifying its processes, cutting costs and becoming more innovative.
On Friday, the company said it had already secured £75m in new funding from institutional shareholders led by major investors – the Danish fashion entrepreneur Anders Povlsen’s Bestseller group and US hedge fund Camelot Capital Partners.
A further £5m in new shares will be offered to smaller investors with the two share placings equivalent to a fifth of Asos’s share capital.
Analysts from Peel Hunt said the £275m borrowed from Bantry Bay, a firm backed by the hedge fund Elliott Advisors, under a three-year deal gave Asos more flexibility than the £350m facility it replaced and the ability to “push on with its recovery strategy without dancing around its bankers every few months”.
However, the facility comes with a high 11% interest charge and analysts at Liberum said there was still a high risk that Asos’s turnaround plan would not be successful and it would be forced to refinance again.
“There still remains a worst-case scenario that further financing may be needed to replace the £500m convertibles in 2026,” Liberum analyst, Anubhav Malhotra, wrote in a note.
Shares in Asos were down 3% on Friday.
The fundraising comes after the online fashion retailer revealed this month it had made a loss of £291m in the six months to 28 February after sales fell by 8%, including a 10% drop in the UK. The sales drop was far worse than the 3% expected by the City as the company said it had deliberately shifted away from unprofitable sales and suffered from weak consumer demand and the December postal strikes.
Asos, Boohoo and other online fashion specialists are struggling to deal with a rapid change in consumer behaviour as high streets reopened after the pandemic restrictions. A return to physical shops has come just as shoppers reined in unnecessary spending and looked for ways to save costs – such as avoiding delivery charges.
The cost of handling shoppers’ unwanted items has also shot up as wages for warehouse workers and delivery drivers and energy and petrol costs have risen. Customer returns have increased after a shift back to more fitted fashion suitable for the office or formal occasions. Return rates slumped during the pandemic lockdowns as many turned to easy-fit hoodies and jogging bottoms.
Online fashion sellers have also faced increasing competition from the likes of China’s Shein which now accounts for nearly 3% of the UK’s online apparel market, according to analysts at GlobalData, up from almost nothing – less than 0.2% – in 2019.
