Boohoo rejects criticism from Frasers Group as ‘inaccurate and unfair’

Frasers Group, which holds a 27% stake in Boohoo, is pushing to appoint its founder Mike Ashley as the new chief executive of the struggling online retailer. In an interview with Nils Pratley on Friday, October 25, 2024, the complexities surrounding this potential leadership change became evident.

Boohoo responded strongly to Frasers’ criticisms, labeling them as “inaccurate and unfair.” On Thursday, the owner of Sports Direct sent a letter to Boohoo’s board, demanding an emergency shareholder meeting to vote on Ashley’s appointment, aiming to replace current CEO John Lyttle.

Lyttle, who came on board from Primark in 2019, announced last week that he would step down as soon as a successor is found, following the company’s acquisition of a £222 million debt facility.

Frasers didn’t hold back in its letter, criticizing Boohoo’s board for allegedly having “lost its ability to manage the company’s business and investments.” The letter deemed Boohoo’s debt refinancing strategy as “wholly unsatisfactory,” warning that it would lead to an “appalling outcome for shareholders.”

In contrast, Boohoo defended its position, asserting that Frasers’ view of its debt refinancing was both misleading and unjust. The retailer insisted that the new deal would provide stability for its future and pointed out that refinancing discussions had been ongoing with Frasers, which had yet to suggest any alternative plans.

Boohoo highlighted Frasers’ 23.6% stake in rival Asos, suggesting this connection should be considered carefully by its board.

While Boohoo experienced a spike in sales during the COVID-19 lockdown, its fortunes have shifted dramatically since then. The company’s valuation has fallen to £395 million, leading to a painful decision to lay off 1,000 employees this year amid losses that ballooned to £160 million.

In Thursday’s letter, Frasers touted Ashley as the “strongest candidate” for the CEO position and urged for his swift installation. The group, which also owns House of Fraser and Evans Cycles, further proposed adding restructuring expert Mike Lennon to Boohoo’s board.

Frasers began investing in Boohoo in June 2023 and has gradually increased its stake. Boohoo indicated that while Frasers had expressed interest in appointing a non-executive director, they eliminated the possibility of Ashley filling that role on October 9. Following Lyttle’s departure announcement on October 18, Frasers quickly nominated Ashley for the CEO role, demanding a confirmation within 48 hours.

Interestingly, Umar Kamani, the 36-year-old billionaire founder of PrettyLittleThing and son of Boohoo co-founder Mahmud Kamani, had been seen as a potential candidate for the CEO position.

Boohoo emphasized that choosing a new CEO is a crucial decision that must be made with careful consideration and proper governance, confirming that the process is underway. The Boohoo board expressed openness to discussing directorship appointments with Frasers “in a constructive manner,” but noted that they still seek assurances regarding adherence to “appropriate governance.”

In the wake of these developments, Boohoo shares saw a 3% rise on Friday. Frasers has yet to respond to requests for comment.