Mike Ashley, the retail tycoon, has made a bold bid to become CEO of Boohoo. He is pushing for a merger between Asos and the struggling fast fashion retailer.
Ashley’s Frasers Group’s proposal would reshape online fashion retail, consolidating two of UK’s largest digital players and expanding Ashley’s influence over the industry.
It is believed that the group behind Sports Direct House of Fraser, Flannels and Flannels – which owns a large stake in Boohoo, Asos and Boohoo – sees value in combining Asos’s access to brands and Boohoo’s appeal to younger demographics. The group also sees this as an opportunity to expand Frasers Plus, their buy-now, pay-later service. Asos, as well as Boohoo, have suffered since the advent of rivals in ultra-fast fashion such Shein. Asos shares and Boohoo’s are down 90 percent over the last five years.
Mike Ashley’s group owns a 27% stake in Boohoo. Asos, on the other hand, is believed to be against the merger, because it does not want to be associated Boohoo brands.
Frasers, in an open-letter, called on Boohoo, the company’s outgoing chief executive to replace John Lyttle with Ashley after reports that the company might be split up.
Ashley owns 27 percent of Boohoo. He has warned the fast fashion outlet that it “urgently” needs to “address the management of its company” due to its “abysmal performance in trading and its share price crash”. Ashley’s retail group owns 27 per cent of Boohoo and has warned that the fast-fashion outlet “urgently needs to address its management” owing to its “abysmal trading performance and share price collapse”.
Frasers wrote: “The company’s revenue for the six month trading period ending August 31, 2024 has decreased by around 36,5%.” When Boohoo reports its full half-year results for November, we expect gross profit to follow the trend of declining revenue.
The board presided over the long-term decline in Boohoo’s share price. It has dropped over 29 percent year to date and 17 percent in the last 3 months.
Frasers accused Boohoo as well of failing to respond properly to its requests for a re-fresh of the board. Frasers claimed it was subjected “delay and disregard” tactics in trying to meet Mahmud Kamani.
The letter stated: “We recognize stonewalling and we are not going to tolerate these tactics, which include ‘delay and disregard’ in light of the ongoing value destruction at Boohoo that the board oversees.”
Boohoo announced last week that it was reviewing options to “unlock and maximize shareholder value”. This could lead to the sale of brands like PrettyLittleThings, Dorothy Perkins and Burton. Frasers, it is believed, is concerned about Kamani’s desire to buy the brands back himself.
The review also set up a boardroom fight between Ashley, who is a long-time rival. Since Frasers began building a stake into Boohoo back in June 2023, a confrontation has been in the making.
Recently, the pair were said to have argued over FaceTime. Sources claim that Sir Philip Green was the man who tried to bring the two together. This is surprising because he used to be known as the “king of high street”. After a backlash by investors , Boohoo had to withdraw its multi-million pound executive bonuses in May.
Clive Black, Shore Capital, said that it remains to be determined whether this will benefit Boohoo’s shareholders. It may not be as bad as it seems, although the fact that Frasers may want to take on Debenhams while also being a possible CEO of Boohoo makes for an interesting situation. “Get out the popcorn.”
Boohoo issued a statement in which it said that the Boohoo Board is reviewing the content of the requests with its advisors. In due course, a further announcement will be released.
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