Businessman Mike Ashley has launched a sensational bid to become CEO of online fashion retailer boohoo Group plc.
The founder of Frasers Group plc, which holds around 27% of the company’s voting rights, has sent an open letter to boohoo citing a “leadership crisis”, “abysmal go-to-market performance” and “mis-management” in requisitioning an extraordinary general meeting.
Frasers is unhappy at what it perceives as “stonewalling” from boohoo and also the new £222 million debt financing agreement, agreed last week alongside the news that John Lyttle is to step down as CEO in the coming months. Lyttle spent nine years as the chief operating officer at Primark before joining boohoo as CEO in 2019.
The requisitions propose to appoint Sports Direct CEO Ashley and Mike Lennon – a restructuring professional with significant experience in retail assignments – as directors of the company and to remove Lyttle as a director.
They also propose to appoint Ashley as CEO.
“Frasers Group plc writes to you today to once again express its view that there is a leadership crisis at boohoo,” read the letter. “We continue to believe strongly in the potential of the boohoo business. However, the company urgently needs to address the management of its business.”
Six-month trading for the period ending 31st August 2024 is down 36.5% on the comparable period three years ago, with Frasers saying it expects that “gross profit will follow the declining trend of revenue… the impending £125m of cost savings that were first announced to the market in October 2023 appear to have been eroded by abysmal go-to-market performance”.
It continued: “The board has lost its ability to manage boohoo’s business and investments. A further example of the board’s mis-management of boohoo relates to the debt refinancing… the terms are wholly unsatisfactory. Frasers considers the refinancing to be a step backward for the company and an appalling outcome for shareholders.
“The new £222m facility is severely short dated, seemingly more expensive than the previous financing arrangement and almost unquestionably leaves the company in a position of needing to undertake drastic corporate actions – whether it be disposals, deeper operational cuts or closures – in order to repay the term loan due in 10 months.
“Had boohoo engaged constructively with Frasers on the refinancing, alternative solutions could have been fully explored which may have resulted in a more favourable outcome for all stakeholders.”
It said the board has “presided over a long-term collapse in boohoo’s share price”. This has fallen over 29% year-to-date and 17% in the last three months.
“There has been a complete failure to meaningfully engage with us, your largest shareholder,” accused Frasers.
“We recognise stonewalling when we see it, and these tactics of ‘delay and ignore’ are no longer tolerable in the context of the continued value destruction that the board is overseeing at boohoo.”
It add that Lyttle’s impending exit creates a “leadership void” and is an “impediment on boohoo’s return to growth”.
“Finding a replacement who can not only reinvigorate the company, but also deliver best-in-class operational oversight, will be very difficult to achieve in the near term… appointing Mr Ashley as a director and CEO of boohoo is the best solution to boohoo’s leadership crisis.”