Boohoo CEO to step down and review fuels speculation of potential break-up

Manchester-based online fashion retailer, boohoo Group, has clinched a £222m funding deal, but also announced today that CEO John Lyttle is to step down, and that it will embark on a review to ‘unlock and maximise shareholder value’, which could be interpreted as an impending break-up of the business.

In a statement to the stock exchange today, boohoo said it has agreed a new £222m debt facility with a consortium of its existing relationship banking group.

It compromises a £125m revolving credit facility that runs to October 2026, and a £97m term loan that is repayable by August 2025.

Also, the board said it believes the group remains fundamentally undervalued following the developments of recent years, which have created a business with five core brands, addressing a diverse global customer base:

Debenhams has been repositioned as a leading British online department store with around five million active customers.

The group also has three online retail brands with strong brand identity in PrettyLittleThing, boohoo and boohooMAN. Collectively they serve more than 14 million customers with GMV (gross merchandise value) in excess of £1bn in FY24.

And the group has transformed Karen Millen into a digital first, premium global brand.

The group said it has already executed on a series of decisive and robust strategic initiatives to drive operational efficiencies and optimise the cost base over the past 18 months.

It added substantial strategic progress has been made, including the reinvigoration of the Debenhams and Karen Millen brands.

But it said the board strongly believes there is potential to unlock shareholder value and is exploring options to deliver on this. 

It said the board remains committed to open and transparent engagement with all of its stakeholders and will communicate further as appropriate.

Only last week, Russ Mould, investment director at Manchester-based investment platform AJ Bell, remarked on the travails of boohoo and the possibility of a break-up.

He said: “Sales have tanked, the share price is in the doldrums and rumours are swirling that the company is on the cusp of a massive break-up. It’s carrying too much debt; it’s faced question about the treatment of suppliers; its shopper has been put off by return charges and its offering has somehow fallen out of fashion.

“Sometimes big is beautiful and sometimes it’s too unwieldy. In boohoo’s case it seems like a business that grew too quickly and couldn’t quite figure out how to manoeuvre.”

Today’s statement also revealed that, in the second half of FY25, the group expects a higher GMV and a stronger adjusted EBITDA performance, when compared with H1 25, despite further investment into the brands to unlock shareholder value.

Unaudited figures for the first six months, to August 31, 2024, show that revenues fell 15% to £620m, while adjusted EBITDA of £21m was compared with £31m at the same point last year.

The group said, while performance in the youth brands has remained impacted by the external environment, the group continues to see considerable GMV growth for Debenhams external marketplace, with an additional 5,000 brands signed within the period.

Interim results are scheduled for publication early in November. 

Today’s announcement also revealed that CEO Jonn Lyttle has told the board he intends to step down from the role.

He will continue to work with the leadership team and board over the coming months while a successor is found and to ensure a smooth transition.

Group executive chairman, Mahmud Kamani,  said: “The board is focused on ensuring it takes the right steps to drive boohoo Group in the interest of all its stakeholders.

“We are delighted to have agreed a new lending facility which shows the support of our existing banks and their confidence in the group.”

He added: “The business has evolved over last few years and has an offer that is much wider than our original focus on young fashion. The time is now right to consider options with regard to corporate structure, with the aim of maximising shareholder value.

“I would like to personally thank John for the contribution he has made to the group. John has built a talented and inspiring leadership team who will ensure we are best positioned for sustainable growth.” 

John Lyttle said: “Over the last five years I have been proud to lead the group and I believe there is huge potential in this business and I will continue to work with the board to drive value for all shareholders whilst a successor is found.”

Investment bank, Panmure Liberum, issued a Buy call on boohoo’s shares after today’s update, saying: “While the current trading is disappointing, the Debenhams business is in very strong growth.

“We think the board’s statement to unlock value should put the focus on Debenhams which we think could alone be worth more than the current market cap as a fast growing, profitable, capital light and cash generative marketplace.

“Trade buyers could extract significant value from boohoo, PLT and Karen Millen brands. Our updated SOTP valuation suggests a £650m, 60% upside, which we note is subdued due to current trading woes.

“Further upside of between £60-260m could materialise as trading improves and/or a trade sale of the young fashion brands plays out.”

Its target share price for boohoo is now 35p per share, which compares with a 29.18p level this morning.