Boohoo calls on shareholders to reject Frasers’ proposals as group losses deepen

The embattled fast fashion retailer issued a circular in response to the proposals put forward by majority shareholder Frasers Group and its owner Mike Ashley on October 23, 2024. 

Ahead of a general meeting of Boohoo shareholders on December 20, 2024 to vote on the proposals, Boohoo has told shareholders it has a “credible plan to unlock and maximise value for the benefit of all shareholders through its business review, and that Dan Finley is the right chief executive to lead the business”.

The circular goes on to say that Frasers and Ashley “appears intent on disrupting Boohoo’s business review and acting only in its own commercial self-interest,” adding that: “Frasers has prior history of this sort of corporate behaviour”.

It goes on to say that Frasers’ proposals offer Boohoo shareholders “no protections in relation to the obvious risks” and that Ashley “is conflicted and would not [be] a suitable appointment” to the fashion retailer’s board. 

Boohoo also queries Frasers’ calls to appoint Mike Lennon, given he has a “history of working closesly” with the sportswear giant. It says Lennon has worked with Frasers on “several administration processes” relating to its acquisition of several brands from JD Sports, including Prevu, Kids Cavern, Base Childrenswear and Field & Trek.

Despite the language, the Boohoo circular insists its board is not “deliberately seeking confrontation with Frasers, but will at all times act in the best interests of the company and all shareholders”.

Alongside the circular, Boohoo proposed a conditional fundraising round of up to £39.3m. As markets opened on Thursday, November 14, Boohoo said that its fundraiser had been oversubscribed and had already reached its target. 

Losses deepen in first half

Despite its entrities to shareholders that its current board is the right leadership team to take the brand forwards, Boohoo also reported its latest results for the six months ending August 31, 2024. 

In that period, adjusted losses before tax deepened to £27.4m, while adjusted EBITDA fell by £10.5m to £20.8m. Group revenues slumped by 15% to £619.8m, while gross profits dropped by 19.2% to £314.4m. 

However, the retailer insisted that in the period, Debenhams “has been repositioned as a leading British online department store”, and that Karen Millen has been transformed “into a digital first, premium global brand”. It also insisted that its “youth brands”, such as PrettyLittleThing and BoohooMan collectivley served more than 14 million customers, with gross merchandise value (GMV) of more than £1.8bn. 

Looking ahead, while Boohoo said it still expected some headwinds for its youth brands, it expects a “higher GMV and a stronger adjusted EBITDA performance” in the second half of the financial year. 

New group chief executive Dan Finley said: “I believe that the group remains fundamentally undervalued. We have a significant opportunity to create substantial value for all shareholders through our five core brands.

“I’ve been with the group for nearly three years, joining as chief executive of Debenhams in January 2022, transforming it into a highly profitable, capital light marketplace business. I’m excited at the opportunities I see ahead for the entire group.

“We have brilliant brands and great people, underpinned by best-in-class infrastructure. We have had huge success with Debenhams, and I look forward to extending that across the entire group.

“Last month we announced a business review to unlock and maximise shareholder value. I am leading this review and will update shareholders in due course.

“The first half of FY25 has seen positives. We continue to see significant growth in Debenhams’ marketplace and beauty with year-on-year GMV growth of more than 170%, and more than 10,000 brands on-boarded, already achieving our target for the end of 2024.

“The Group has also reinvigorated and transformed Karen Millen into a digital first, premium global brand which has delivered positive GMV growth in 1H FY25 in a challenging market. The future growth potential is significant through maximising international, licensing, and franchising opportunities and adoption of the marketplace strategy.”

“There have been challenges and we continue to operate within a volatile market. Our Youth Brands have seen a GMV pre returns sales decline. These brands do still have significant scale, a loyal customer base, serving more than 14 million combined active customers with GMV more than £1.8bn in FY24 and are supported by our state-of-the-art automated infrastructure.

“We continue to be cost focused and have taken actions to improve profitability in our youth brands such as closing the US distribution centre.

“As we look forward, I am excited for this next chapter and to deliver on our shared objective to unlock and maximise value for all shareholders. Today we are also announcing that we will host a capital markets day, which will take place in Q1 2025.”