Asos is raising £80m from shareholders and borrowing £275m from Bantry Bay Capital, the specialist lender that recently bailed out troubled retailers Superdry and Matalan, as it looks to turn around £300m in the red was struggling to secure.
The online fashion specialist said it had raised the money to give it “financial headroom” to return to profitability within a year by improving the shopper experience and simplifying its processes, cutting costs and becoming more innovative.
On Friday, the company said it had already secured £75m in new funding from key investors – Danish fashion entrepreneur Anders Povlsen’s Bestsellers Group and institutional shareholders led by US hedge fund Camelot Capital Partners.
£5 million in new shares will be offered to small investors, with two share placings representing a fifth of Asos’ share capital.
Peel Hunt analysts said the £275m loan from Bantry Bay, backed by hedge fund Elliott Advisors, under a three-year deal gives Asos more flexibility than the £350m facility it replaced and “with its recovery Ability to pursue “strategy without having to go around your 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’ turnaround plan would not succeed and it would be forced to refinance again.
“The worst-case scenario still remains that further financing may be required to replace the £500m convertible in 2026,” Liberum analyst Anubhav Malhotra wrote in a note.
Asos shares were down 2% 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 following an 8% fall in sales, including a 10% fall in the UK. The sales decline was much worse than the 3% expected by Citi as the company said it had intentionally shied away from unprofitable sales and was suffering from weak consumer demand and the December postal strikes.
Asos, Boohoo and other online fashion specialists are struggling to deal with rapid changes in consumer behavior as high streets reopen after pandemic restrictions. As shoppers rein in unnecessary spending and look for ways to save costs – such as avoiding delivery charges – there has been a return to physical stores.
The cost of handling unwanted items for shoppers has also increased as wages for warehouse staff and delivery drivers and the cost of energy and petrol have gone up. Customer returns have increased following a shift to more fitted fashions suitable for the office or formal occasions. The return rate plummeted during the pandemic lockdown, as many turned to easy-fit hoodies and jogging bottoms.
Online fashion sellers also face increasing competition from the likes of China’s Shein, which now accounts for around 3% of the UK online apparel market, up from almost nothing in 2019 – up from 0.2%, according to analysts at GlobalData. is less.