Boohoo break up on the cards

Mahmud Kamani and Carol Kane

Ailing Manchester-based fast fashion giant Boohoo is involved in ‘heavy’ discussions about a possible break up, or a sale of key brands.

Its largest shareholder Mike Ashley’s Frasers Group now outnumbers any institutional holding and that of co-founders Mahmud Kamani and Carol Kane. 

Brands owned by Boohoo include Debenhams, Karen Millen and PrettyLittleThing.

Boohoo’s share price has tanked over the last five years by more than 85 per cent.

It has also been reported that Philip Green, the former boss of Top Shop is getting involved in the discussions, which involve dealing with Boohoo’s debt pile, and assisting on operational issues that have contributed to increased losses. 

Analysts have given credibility to the stories by issuing guidance on the shares.

In a note issued yesterday Panmure Liberum said: “With rumours circulating in the press on a break-up of boohoo – we assess what this could look like and mean for the equity value. We see £800m as a reasonable base case, some +115% from the current equity value. 

“The shares are trading materially below this level, and we see a break-up as a clear way of unlocking this value. Debenhams is a truly special asset (capital light, cash generative marketplace) and trade buyers could extract huge value from boohoo, PLT and Karen Millen.”

Panmure’s target price is is materially below the sum of its parts valuation, but any sign that a breakup was in fact on the cards, would see the broker revise its guidance upwards. 

It continued: “We move to BUY (from HOLD) as the trading outlook has improved, comps ease, and valuation remains undemanding.”

In August Boohoo shares hit an all time low of 27p, and have only recovered to levels of 30p by the end of September. 

In May, TheBusinessDesk.com reported that Boohoo had made a pretax loss of £159.9 million in the year ending February 2024 with revenue falling by 17% to £1.46 billion from £1.77 billion.

Further at that time Chief Executive Officer John Lyttle said that Boohoo was well positioned to return to growth that is both sustainable and profitable.

In September Boohoo said it was to close operations at its 1.1m sq ft distribution centre in Pennsylvania and planned to fulfill all US orders from its “state-of-the-art automated” UK warehouse in Sheffield.

However, the dramatic about turn in its US strategy appears to be the latest in a series of steps to slash costs.

Executive chairman Mahmud Kamani has faced wave after wave of fresh challenges in recent months, including competition from Chinese brand Shein, ethical issues over treatment of suppliers and poor performance of the share price, which have been snapped up by rival retailer Frasers. 

Also, the business faces scrutiny from UK competition authorities after a recent investigation into ‘greenwashing’ in its supply chain and their environmental impact.

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