Boohoo Group, the fast-fashion retailer under scrutiny for its financial practices, has announced significant updates to its supplier payment terms, extending payment durations for various suppliers as part of its restructuring efforts.
According to reports, these changes were communicated to suppliers via email last week, indicating the company is moving to strengthen its financial position and streamline its operations. Suppliers based in the UK, Morocco, and Turkey will now find their payment terms extended to 45 days, up from the previous 30 days. International suppliers will see their payment terms extended from 75 days to 90 days.
While the changes are expected to take effect later this month, some suppliers have expressed their concerns. One supplier commented, "This will impact our business, especially as it's difficult to get credit insurance on Boohoo at the moment," highlighting the challenges faced by manufacturers amid tightening credit conditions. Another supplier noted, "It will affect our cashflow, but I hope it works out in the long term [if it can help Boohoo improve its financial position]." This sentiment reflects the mixed feelings among suppliers about the adjustments.
It was also revealed by Drapers, which covers the fashion and retail industry, the move follows Boohoo's prior adjustments to payment terms made back in December 2022. At the time, terms had been extended from 30 to 60 days for UK suppliers and from 14 to 30 days for UK manufacturers. Despite these extensions, Boohoo assures its partners of maintaining what it describes as “highly competitive” payment conditions. "We regularly review our ways of working to... operate as effectively and efficiently as possible," said a spokesperson for the company.
This latest shift is part of Boohoo's broader strategy under CEO Dan Finchley, who took the reins of the company and has expressed his commitment to enhancing operational efficiency and maximizing shareholder value. "I am super energized to realize the significant opportunities I see for this business. I continue to believe this group is materially undervalued. Our most important work is ahead of us, and we will drive value for all shareholders," Finchley remarked following his appointment.
The updates also come after significant shareholder discontent, exemplified by Frasers Group's recent challenge during Boohoo's general meeting held last December. At the meeting, shareholders voted overwhelmingly against resolutions proposed by Frasers Group to appoint their own board members, including Mike Ashley, stirring controversy on governance matters within Boohoo.
Independent Non-Executive Chair Tim Morris expressed gratitude to shareholders during the meeting, stating, "I would like to thank our shareholders for their support of the board. We remain focused on delivering our business review with the objective of unlocking and maximizing value for all shareholders." This indication of shareholder backing sets the stage for Boohoo's future as it navigates its way through restructuring.
Beyond the extended payment terms, Boohoo recently undertook steps to reinforce its financial stability by divesting its Soho office based on Great Pulteney Street for £49.5 million ($61.36 million). The cash obtained from the sale is expected to contribute significantly to settling outstanding debts, including the repayment of a term loan maturing in August 2025. Post-repayment, the company aims to maintain access to a £125 million revolving credit facility for future financial needs.
Another aspect of Boohoo's revamping process includes its redundancy plan initiated at its Manchester head office aimed at reducing overheads and improving operational efficiency. These measures coincide with the backdrop of Boohoo's need to adapt to current industry standards, with some suppliers pointing out how payment terms have become longer across the board compared with three years ago.
With these recent developments, Boohoo Group sends signals of recalibration during challenging market conditions. Amid discussions of supplier impacts, cashflow concerns, and credit insurance battles, the direction under Finchley appears geared toward building resilience for the future.