War of words continues between boohoo and Revolution Beauty

The war of words between Manchester online retail giant boohoo and Revolution Beauty Group continues as the London-based beauty products retailer issued a trading update to illustrate its turnround progress.

Boohoo holds a 26.6% stake in Revolution, which suspended its shares last September following accounting issues. It says it is close to reinstating its shares on AIM as a conclusion to its troubles.

Earlier this week boohoo announced it intended to install its own management team at Revolution by voting against the reappointment of Bob Holt, Derek Zissman, and Elizabeth Lake at Revolution’s upcoming June 27 AGM.

Boohoo has also requisitioned a general meeting where it proposes to remove Bob Holt, Elizabeth Lake and Derek Zissman as directors, and to appoint boohoo non-executive directors Alistair McGeorge and Neil Catto as directors.

The Manchester retailer also revealed it intends to include Rachel Horsefield in its “future independent board appointment process”. Ms Horsefield most recently worked as CEO of Beauty at THG plc, and boohoo says she brings with her a wealth of direct relevant experience and expertise in the beauty sector.

Today, Revolution released trading data for the first three months of the financial year ending February 28, 2024. It said trading has been excellent during this period, with sales up 60% year on year. Gross margins were 48.2%, which compares with 41.7% in the corresponding period last year. EBITDA at constant currency was £3.5m (Q1 FY23: £7.4m loss) and cash on hand was £15.4m (Q1 FY2023: £10.1m).

It said: “This performance demonstrates the quality of Revolution Beauty’s products and consumer offer, and its ability to deliver growing sales into an expanding global retailer base.”

It added: “Boohoo’s stated rationale for the proposed changes to the Revolution Beauty board is that the focus of the group must switch to growth. The company hopes that shareholders are reassured that the current board is similarly minded and that growth is being delivered without one shareholder taking control of the board at the expense of the interests of other shareholders.

“It is also noteworthy that the group’s trading performance has been delivered at the same time as rectifying the significant historical issues that occurred under previous management.”

Responding to boohoo’s intention to add Ms Horsefield to its appointees, Revolution – which recently ceased commercial links with THG – said its board believes the move vindicates its view, that Alistair McGeorge and Neil Catto do not have the relevant experience in running a business in the beauty sector, nor in supplying a store estate and beauty product range which is focused on the high street.

It said: “The board of Revolution Beauty continues to be of the view that it is much better placed than the proposed boohoo candidates to deliver shareholder value. Together with a broad executive leadership team with significant beauty and e-commerce expertise, the company reminds shareholders that, in Jeremy Schwartz, they already have a director with a wealth of experience in the beauty sector.

“Jeremy spent 12 years at L’Oréal, including as managing director in the UK responsible for all consumer, luxury, salon and active cosmetics divisions, and five years as chairman and CEO of The Body Shop, which has some 3,000 stores in 70 countries. Therefore, Ms Horsefield’s proposed addition to the board is not required.”

Chief executive, Bob Holt, said: “The excellent trading performance in the first quarter of the year is testament to the quality of our offer and the strength of our leadership team, and shows that we are delivering on our global retailer strategy.

“This has been achieved at the same time as fixing the historical issues overseen by previous management and putting in place improved cost controls and processes across the business.

“Revolution Beauty has clear positive momentum and we remain focused on restoring trading in the company’s shares. We have a strong platform in place to deliver continued profitable growth”.

Meanwhile Revolution Beauty is not alone in attracting the ire of disgruntled shareholders.

Boohoo itself suffered a shareholder revolt at its AGM yesterday (June 22) over its remuneration policy, which was opposed by 32.48% of the vote.

Chief executive John Lyttle received a £650,000 bonus last year, despite overseeing losses of more than £90m.

In response to the vote, boohoo said: “The board notes that while Resolution 2 was approved, which gave shareholders the opportunity to cast an advisory vote on the directors remuneration report for the year ended 28 February 2023, 32.48% of the votes cast were votes against Resolution 2.

“Over the coming months, the board will reflect on the result of Resolution 2, and the remuneration committee looks forward to ongoing engagement with the group’s shareholders as it continues to shape the group’s future remuneration policy.”

It added that the execution of its ‘Back to growth’ strategy continues apace and guidance remains unchanged from that issued previously in May, with an expectation to return to profitable growth in the second half of the financial year as a result of the anticipated benefits from investments being made across price, product and proposition.

It said this is expected to improve adjusted EBITDA year on year and the group continues to focus on maintaining its strong balance sheet.”