Frasers Group wants to appoint its boss Mike Ashley as the chief executive of fast fashion brand Boohoo, citing “long-term mismanagement” which has led to “value destruction“.
The Mike Ashley-owned company wrote to the board of Boohoo this morning, saying the group was suffering from a “leadership crisis”.
In a message to markets this morning, Frasers, Boohoo’s largest shareholder, which owns around 27 per cent of the business, said it was “committed to maximising value” for shareholders.
The firm said it is: “Requisitioning a general meeting of Boohoo to appoint Mr Mike Ashley as a director and CEO of Boohoo and Mr Mike Lennon as a director of Boohoo, to take effect without delay.”
“Frasers firmly believes that these appointments are in the best interests of Boohoo, its shareholders and its stakeholders.
“The board appointments proposed by Frasers are now the only way to set a new course for Boohoo’s future. Frasers urges Boohoo shareholders to vote in favour of its proposals.”
In an open letter sent to Boohoo’s board alongside this, it bemoaned the “abysmal trading performance and share price collapse,” saying that in “the six-month trading period ended 31 August 2021, the company’s revenue for the six-month trading period ending 31 August 2024 is down 36.5 per cent.”
It added: “We expect that gross profit will follow the declining trend of revenue, and when Boohoo announces its half-year results in full in November, gross profit will be down for the 6th consecutive reporting period.”
Frasers also criticised Boohoo for “the impending £125m of cost savings that were first announced to the market in October 2023”, which “appear to have been eroded by abysmal go-to-market performance.”
Saying it “has lost its ability to manage Boohoo’s business and investments”, Frasers also warned that Boohoo’s “debt refinancing are wholly unsatisfactory”, calling it “a backwards [move] for the company and an appalling outcome for shareholders.”
Frasers said the £222m debt refinancing facility “almost unquestionably leaves the company in a position of needing to undertake drastic corporate actions..in order to repay the term loan due in 10 months.”
It said this “long-term mismanagement” had led to the collapse of Boohoo’s share price, down almost 30 per cent in the year to date and 17 per cent in the last three months alone.
They also accused Boohoo of repeatedly ignoring requests for meetings, saying: “We recognise stone-walling 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 is understood the Boohoo board will meet today.
Boohoo responded to the Frasers announcement and letter with a formal receipt to the markets.
It acknowledged: “The requisitions propose to appoint Mike Ashley and Mike Lennon as directors of the company and to remove John Lyttle as a director of the company. They also propose to appoint Mike Ashley as chief executive officer, should he be appointed as a director.”
“The Boohoo board is in the process of reviewing the content and validity of the requisitions with its advisers. A further announcement will be made in due course.”
“In the meantime, shareholders are urged to take no action.”