Boohoo warns suppliers of late payments amid fears of cash squeeze

Boohoo suppliers face late payment from the fashion chain amid mounting fears of a cash crunch.

The company, which now trades as Debenhams, has written to some suppliers telling them it was “running behind on payments” and has asked traders to confirm how much stock they can deliver during September without being paid more, according to a company email seen by The Telegraph.

The threat of potentially withholding some supplier payments comes just months after The Telegraph revealed that customers were facing delays of up to a month of refunds for sending back unwanted items.

At the time, Boohoo admitted that it was paying refunds for items that had been returned more slowly than usual, although did not offer an explanation for the delays.

Only last month it announced it had agreed a new £175m borrowing facility.

It was intended to put the group on a surer footing but has already faced criticism from its leading shareholder, Mike Ashley’s Frasers Group, which warned the arrangement meant money was being “sucked out” of Boohoo.

In a letter sent to Boohoo’s chairman, Frasers questioned why the company had agreed to that deal when “cheaper financing was available”. The loan carried an unusually high interest rate of 7.3pc above the Bank of England base rate.

The email comes amid growing financial strain on Boohoo after its annual losses surged to £348m from £160m a year earlier. Sales were also down almost a fifth to £790m and the value of its net assets also collapsed to just £3.9m from £280m a year earlier.

Analysts at Shore Capital last month said the company appeared “very constrained” amid a cash squeeze.

Boohoo and its clothes-makers have tussled for years over payments and the latest request threatens to reignite tensions between the two sides.

Mahmud Kamani, Boohoo’s co-founder, previously promised to “make everything better” after the company faced serious criticism in 2020 over poor working conditions at some of the factories.

In 2023, Boohoo was also accused of squeezing suppliers after a TV documentary claimed to show evidence staff were pressing suppliers to cut prices. The company said this followed significant cost inflation and it had begun asking suppliers to lower their prices once the issues eased.

Last year, Boohoo then refused to pay some suppliers over claims the quality of their clothes was too poor, with sources saying at the time that it was entitled to withhold money. It said it was speaking to some suppliers where “the product supplied was not of a high enough standard”.