- Ashley blasts Boohoo’s ‘egotistical’ founder
- Frasers’ criticisms labelled ‘superficial’
- Boohoo highlights ‘credible’ turnaround plan
Boohoo’s (BOO:AIM) shares were bid up 2% to 36p after the struggling online fashion group revealed that Institutional Shareholder Services (ISS) has recommended shareholders reject Mike Ashley’s bid to become CEO at the company’s forthcoming general meeting (20 December).
Independent proxy adviser ISS has criticised Frasers’ (FRAS) take on Boohoo’s performance as ‘superficial’ and highlighted potential conflicts of interest surrounding the Sports Direct-owner’s resolutions to make Ashley the CEO of Debenhams-to-Karen Millen owner Boohoo and hand Mike Lennon a boardroom seat.
To recap, Frasers has amassed a 27% stake in Boohoo and wants to play a bigger role in the fast-fashion group’s strategic review. However, PrettyLittleThing owner Boohoo has labelled the Ashley-controlled retail conglomerate a ‘trade competitor’ which is using its stakes in other retailers to further its own commercial self-interest.
KAMANI’S ‘UNHEALTHY GRIP’
In his latest open letter to Boohoo’s shareholders, Mike Ashley blasted Boohoo for having an ‘egotistical founder’ in Mahmud Kamani with an ‘unhealthy grip’ on the board, and argued Boohoo is in ‘desperate need of the guidance I can provide’.
The retail tycoon also warned against a turnaround that may involve the ‘fire sale of assets at knockdown prices’ including the Debenhams brand Ashley has long coveted and which he argues should not be sold.
A CREDIBLE PLAN
In its latest statement, Boohoo said: ‘ISS states that Frasers has offered a superficial view of performance and no specific plans for change and the two Frasers candidates, Mike Ashley and Mike Lennon, have real conflicts of interest, concluding that board change at Boohoo Group is not warranted.’
Boohoo also insisted it has ‘a credible plan to unlock and maximise value for the benefit of all shareholders through its business review’ and in new broom Dan Finley, has ‘the right CEO to lead the business’.
The embattled retailer added: ‘Frasers appears intent on disrupting Boohoo’s business review, destabilising the company and acting only in its own commercial self-interest. Frasers has prior history of this sort of corporate behaviour.’
Manchester-headquartered Boohoo fashion added that Ashley is ‘conflicted and not a suitable appointment to the board’ and pointed out that Lennon is ‘a practicing insolvency expert with a history of working closely with Frasers; shareholders should ask themselves why Frasers would want him in situ at Boohoo. The board is not deliberately seeking confrontation with Frasers, but will at all times act in the best interests of the company and all shareholders.’
Like Boohoo, apparel retailer Frasers is also finding the going tough, having stunned the market on 5 December by cutting its full-year 2025 adjusted profit targets, blaming a dip in consumer confidence due to the Budget, while increasing its cost forecast for the 2026 financial year.
THE EXPERT’S VIEW
AJ Bell investment analyst, Dan Coatsworth, said: ‘Boohoo has seized upon ISS’s latest recommendation to launch another attack on Frasers. This follows comments at the weekend from Mike Ashley that Boohoo must avoid a “fire sale” of assets.’
Coatsworth added: ‘The fate of Boohoo will be in the hands of its shareholders when they vote on 20 December. At 35.88p, Boohoo’s share price is on its knees, trading at a fraction of the 400p+ level seen in 2020. Long-suffering shareholders might welcome someone of Ashley’s calibre joining the board and offering a different viewpoint to revive the business. Equally, some shareholders may not take kindly to his vulture-like tendencies and view a board appointment as a pre-cursor to Frasers muscling in and taking Boohoo out on the cheap.
‘What’s certain is that both parties are going to be working flat out over the next 11 days to get their viewpoint across and win over Boohoo shareholders.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
