The owner of Boohoo and Debenhams is raising £35m from shareholders in a move that could open a fresh conflict with Sports Direct founder Mike Ashley.

The company, which also owns Oasis, Warehouse, Pretty Little Thing and Karen Millen, said on Tuesday that the new cash would help reduce debts and fund its turnaround plans. These involve slashing costs, selling off a distribution centre and operating Debenhams as an online marketplace for other brands.

The fund raise, backed by the Boohoo founder, Mahmud Kamani, comes less than 18 months after the group raised £39m from shareholders as it battles to revive sales amid heavy competition from rivals such as Shein and Vinted.

Debenhams, which changed its name from Boohoo last year, posted a share price fall of almost 9% on Tuesday morning. The independent retail analyst Nick Bubb said: “Investors may be dismayed at the group’s financial situation.”

Analysts at Peel Hunt said Debenhams was “bumping up against covenants” on a three-year £175m debt facility.

Debenhams said all its brands were now trading profitably and it was on track to deliver underlying group profits of £50m in the year to the end of February, in line with previous guidance.

It said: “The turnaround plan is going apace.

“The fourth quarter has continued to see material improvements in the group’s [sales] trend, alongside the continued removal of significant cost from the business as it is simplified.”

It said institutional shareholders in Debenhams had already indicated support for £24m of the fund raising, which at 20p a share is at an 11% discount to Monday’s closing price.

However, it is not clear if Ashley’s Frasers Group, Debenhams’ biggest shareholder with a near 30% stake, will back the cash call.

Frasers has previously criticised the group’s plans to sell off assets, while Ashley sought to become the chief executive of Boohoo but was blocked by the company from putting that proposal to shareholders in 2024. A few months later Boohoo shareholders blocked Ashley and an associate from joining its board.

Last month, Debenhams said it had ditched plans to sell Pretty Little Thing but it indicated on Tuesday that it was still considering “non-core asset disposals at best possible value” and licensing of brands as part of its efforts to reduce debts.

“The board has multiple strategies to de-leverage the group further,” it said in a statement.

Ashley lost out to Boohoo when it bought the Debenhams brand in 2021 after the department store’s collapse.

In March last year, Frasers voted to block formalisation of the group’s name change from Boohoo to Debenhams.