Frasers goes public on ‘crisis’ at boohoo as it pushes for Mike Ashley to become CEO

Mike Ashley, founder of Frasers Group and its Sports Direct brand, has moved to oust John Lyttle, CEO of Manchester-based online fashion retailer, boohoo, and replace him on the board.

Frasers is boohoo’s largest shareholder, with around 27% of the issued share capital.

Today (October 24), Frasers has published an open letter which it has sent to the board of directors of boohoo requisitioning a general meeting of boohoo to appoint Mike Ashley as a director and CEO of boohoo and Mike Lennon as a director of boohoo, to take effect without delay.

In the letter, which is is signed off by Frasers company secretary Robert Palmer, it warns of a “crisis” at boohoo, pointing out that the firm’s revenue for the six months to the end of August was down 36.5% and saying that when it publishes its half year results in November, gross profit will down for the sixth consecutive reporting period.

The letter goes on to criticise a number of other issues, such as boohoo’s £222m debt refinancing deal, which was recently announced. Frasers calls this “severely short-dated, seemingly more expensive than the previous financing arrangement and almost unquestionably leaves the company in a position of needing to undertake drastic corporate actions (whether it be disposals, deeper operational cuts, closures etc.) in order to repay the term loan due in 10 months.”

The letter adds: “Frasers has made repeated attempts to engage with the Board on a wide number of urgent and pressing issues facing boohoo, including the total lack of willingness to consider alternatives which Frasers proposed to the refinancing. There has been a complete failure to meaningfully engage with us, your largest shareholder.

“Frasers said it firmly believes that these appointments are in the best interests of boohoo, its shareholders and its stakeholders, adding that the proposed board appointments are now the only way to set a new course for boohoo’s future.”

It also criticises the unwillingness of boohoo’s senior team to engage with Frasers around the “effectiveness of the current senior team” at boohoo.

The letter adds: “Your first response of 11 October 2024 completely ignored this proposal. It also effectively ignored the urgency of this meeting, stating that no meeting was possible in the timeframe we requested due to ‘pre-existing travel commitments’.

“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.”

At a crunch meeting held on October 18 between Frasers and boohoo representatives, Frasers says it asked for an explanation regarding the “entirely inconsistent and contradictory” responses received from boohoo to Frasers’ proposal for Board representation.

Frasers’ letter says: “No satisfactory explanation was given.

“In addition, Frasers specifically requested the company to revert to Frasers by the end of Sunday, 20 October 2024 with a decision on our proposal for Mr. Mike Ashley to be appointed as a director and CEO of the company in light of Mr John Lyttle’s intention to step down as CEO, to take effect as soon as possible.

“At the time of this letter, Frasers has not received a decision from the Board regarding Mr. Ashley’s appointment. Instead, we have received holding responses that result in further delays in a situation where time is of the essence. Frasers therefore has no choice but to assume that the board has rejected Frasers’ proposal for board representation.”

Frasers complains of a “leadership void” at boohoo, which it says it an “impediment” on its return to growth.

The letter ends: “For too long, this board has ignored the views of shareholders and refused to meaningfully engage with their ideas. But no longer. We are requisitioning a shareholder meeting to provide a referendum on the large-scale value destruction and long-term and continued incompetence of the current Board and to provide a solution to boohoo’s leadership crisis.

“We are confident that we are not alone in these views and that shareholders will vote for the governance change that boohoo so badly needs.

“We look forward to confirmation from boohoo that the general meeting we are requisitioning will be held as soon as possible, given the urgency of the situation.”

In a reply, boohoo said: “boohoo confirms that it has received letters and accompanying notices dated 23 October 2024 from HSBC Client Holdings Nominee (UK) Ltd. on behalf of Frasers Group plc , seeking, as a holder of approximately 27% of the voting rights of the Company, to requisition an extraordinary general meeting of the company.

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.”