Boohoo shareholders suggested to vote towards appointing Mike Ashley to board

A prominent shareholder advisory firm has advised Boohoo investors to reject Frasers Group’s plans to overhaul the online retailer’s leadership.

Institutional Shareholder Services (ISS) said the Karen Millen owner’s investors should vote against resolutions at the general meeting on 20 December that would make Frasers chair Mike Ashley and restructuring specialist Mike Lennon board members.

ISS said the two men have ‘real conflicts of interest’, noting that Lennon – a close ally of Ashley, has a ‘history of working closely’ with Frasers.

It also accused Frasers, which owns Sports Direct and is Boohoo’s largest shareholder, of providing a ‘superficial view’ of the company’s financial results and ‘no specific plans for change’.

The recommendation follows another open letter by Ashley published over the weekend where he blamed Boohoo’s board for presiding over a ‘catastrophic mess’.

Pointing to Boohoo shares plunging by 90 per cent in the past five years, Ashley said the firm was suffering from ‘panic-driven mismanagement’ that is heavily impacting shareholder value and putting its future at risk.

Ashley attempted to get himself appointed as the company’s next chief executive after Boohoo announced in October that John Lyttle would stand down after five challenging years at the helm.

It came as Boohoo unveiled a business review ‘to unlock and maximise shareholder value’, raising speculation that some of its brands would be sold or spun off.

But in a major snub, Boohoo decided to go with Debenhams boss Dan Finley, who was previously the group multi-channel director at JD Sports for ten years.

In his letter, Ashley described the appointment of Finley, as well as Mahmud Kamani and Tim Morris, to the executive vice-chair and chairman posts, respectively, as the ‘epitome of chaos, a desperate attempt to mask dysfunction at the top’.

The outspoken retail tycoon also said that having met with Finley, Boohoo should hold onto Debenhams and avoid a ‘fire-sale’ of assets to help turn around the business.

Finley acknowledged on Monday that Boohoo was ‘fundamentally undervalued’ but said there was ‘enormous opportunity for the group’.

He added: ‘Working with Tim, our independent non-executive chairman, overseen by our independent board, I am fully focused on creating maximum value for, and protecting the interests of, all shareholders.’

Following the ISS recommendations, Frasers said in a statement: ‘The ISS opinion pre-dates the statements from Mr. Ashley yesterday. 

‘Mr. Ashley set out clearly in his letter of 8 December his determination to work on behalf of all Boohoo shareholders and support Dan Finley to deliver on the opportunities to turn around the fortunes of the group and restore shareholder value. 

‘He has been very clear he would not want Debenhams sold or any fire sale of assets and has put on record his commitment to transparency and shareholder consultation, something badly missing under the current board. 

‘To achieve this, Boohoo shareholders must vote for the resolutions on 20 December.’

Like many online fashion retailers, Boohoo enjoyed considerable growth during the early days of the Covid-19 pandemic thanks to stringent lockdown restrictions on physical stores driving Britons to buy their clothes on the internet.

However, its sales significantly slowed and shrank as those curbs loosened, cost-of-living pressures intensified, and more consumers chose to purchase clothes from rivals like Shein.

In the financial year ending February, Boohoo’s revenue declined by more than £300million to £1.5billion, while its pre-tax losses jumped by around three-quarters to £159.9million.

Boohoo Group shares were 1.7 per cent higher at 35.9p on Monday morning, while Frasers Group shares were 0.9 per cent down at 632.5p.