Even in boohoo world it’s been a tumultuous 24 hours.
It’s 10 years since the company listed on the London Stock Exchange which valued the Manchester-headquartered retailer at £560m.
I remember interviewing the co-founders Mahmud Kamani and Carol Kane in 2014 for an article headlined: ‘The rise and rise of boohoo.’
Much like boohoo, the headline has not aged well.
Fast forward a decade and boohoo is on the ropes. Yesterday Ashley delivered what some analysts think could be the knockout blow with an open letter to the board.
It’s also prompted speculation about Ashley’s motivation and what boohoo’s response will be.
But first a recap.
Last week the company made a double announcement.
Firstly, they confirmed CEO John Lyttle would be leaving in the ‘coming months’
Secondly, they’d revealed they’d signed a new £222m debt financing agreement with a consortium of its existing relationship banking group to drive the next phase of development.
However, if they hoped the news would appease their critics – especially their largest shareholder Frasers Group – they got their answer yesterday in a bombshell open letter signed by company secretary Robert Palmer.
It spoke of a ‘leadership crisis’ at boohoo, an ‘abysmal trading performance’ and accused the company of ‘stonewalling’ them.
It went on: “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 that was announced.
“Frasers’ view is that the terms of the debt refinancing are wholly unsatisfactory. Fraser 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, closures etc.) 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.”
The letter also pointed out that boohoo’s share price had dropped 29 per cent this year and 17 per cent in the last three months.
However, the biggest talking point centred on John Lyttle’s departure as CEO and his possible replacement.
“The resignation of Mr Lyttle creates a leadership void and is an impediment on boohoo’s return to growth,” claimed Frasers.
“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.”
The letter has sparked a flurry of speculation about what Ashley’s end game is.
The first thing to say is that as boohoo’s largest shareholder with 27 per cent of the issued share capital, Frasers Group has every right to protect its investment.
However, it’s also worth making an important point. Boohoo group is about much more than just boohoo, consisting of five core brands – and they’re not all in the mire.
PrettyLittleThing, boohoo and boohooMAN are categorised as ‘young fashion brands’ and nobody is denying they’re finding it tough. Fast fashion has changed and Shein has stolen a march on them.
However, their portfolio also includes Debenhams and Karen Millen and they’re performing a lot better.
Boohoo bought Karen Millen for £18.2m in 2019 and the Debenhams brand (but not the stores) in 2021 for £55m.
Debenhams is growing fast and is profitable while Karen Millen has been transformed into a global brand.
Although Frasers Group might not be a household name, Sports Direct International is. It rebranded as Frasers Group in 2019 after acquiring the iconic House of Fraser brand in 2018.
Frasers Group has been busy snapping up shopping centres across the UK as it grows its property portfolio.
Ashley has a track record in bricks and mortar retail so the part of boohoo group that might really appeal to him could be Debenhams (and Karen Millen) rather than eCommerce businesses like boohoo and PrettyLittleThing.
Boohoo’s announcement last week that it plans to ‘unlock shareholder value’ led to speculation that it’s planning to break-up the business.
Could boohoo be about to offload Debenhams and Karen Millen as it attempts to revitalise younger target market?
Frasers Group made its position clear on this point in its open letter by putting its response in bold letters. “Frasers would like to make absolutely clear that no disposals should be made without first consulting Frasers and all other major shareholders,” it said.
There’s no doubt that the carefully worded letter has been a shot across the bows of boohoo.
Yesterday the Guardian said that PrettyLittleThing’s founder Umar Kamani, who returned to run the retailer in September, was being tipped to take over as boohoo’s chief executive after Lyttle’s departure – although such a move seems unlikely.
What’s clear is that yesterday’s open letter felt big and that Umar’s father Mahmud Kamani is in a fight.
This morning boohoo issued a statement claiming Frasers Group handed it a 48-hour deadline to confirm Ashley as CEO last Friday evening.
Boohoo’s share price currently stands at 28.5p – down from £4.13 in June 2020 – and I was reminded of a quote Mahmud gave me in our 2014 interview.
“I’m a very, very simple man,” he said. “I only know one job. Indians used to laugh at me. Ten years ago all my friends would say Indians were either on the markets or doctors. I said ‘well you know I’m not a f***ing doctor’.”