Retail Week takes a closer look at what actions Mike Ashley is likely to take if he can seize control of Boohoo, as the battle between the fashion retailer and Frasers becomes increasingly fraught
In the latest escalation of the public war of words between the two retailers, Frasers publicly called for Boohoo founder and chair Mahmud Kamani to step down and proposed that Mike Ashley should be appointed as director instead.
In its note to shareholders titled “A simple choice: win with Mr Ashley or lose with Mr Kamani,” the sportswear retailer declared that “recent events, in particular the results, lack of transparency and further supply chain allegations, should leave shareholders in no doubt – Mr Kamani must go”.
For all the bluff and bluster though, what exactly does Ashley plan to do if he can wrest control of the retailer? Retail Week takes a closer look at what Ashley’s plan of action with the struggling fast fashion retailer may be and why some analysts are less convinced the Frasers Group founder is the right man to turn it all around.
Ashley’s game plan
In addition to explaining why Ashley is a better fit than Kamani, and how Frasers has returned £800m to shareholders over the last five years, the letter also provides some details on what Ashley’s first steps will be if and when he takes on the role of director.
It stated that Ashley, along with restructuring expert Mike Lennon, will “push for total transparency” within the business stating that “for too long, the current Board has failed to disclose to the market and to shareholders what is really happening at Boohoo” and to “review Boohoo’s financing arrangements to understand what the terms of Boohoo’s refinancing actually are and consider how best to improve Boohoo’s financing position”.
Other measures include fixing Boohoo’s supply chain, as it stated “the scandals must end once and for all and the current board, led by Mr. Kamani, is clearly not in a position to end these”.
This comes after The Telegraph broke the news about Boohoo reviving ties with a manufacturer it had axed in the wake of its modern slavery scandal.
Frasers also said that with Ashley and Lennon will bring “decades-long retail and logistics expertise and experience” which they will use to “lead the drive to return Boohoo to profitability.”
And lastly, it added that a “return to a winning mentality at Boohoo” was needed and although Ashley, Lennon and Frasers continue to “believe strongly in the potential of the Boohoo business and its brands,” a change at the top is required to realise this potential.
Retail Week was guided to the letter when asked to provide further details on a plan of action by Frasers.
A simple choice?
Although Frasers’ letter to Boohoo calls the choice between Kamani and Ashley a simple one, one source thinks otherwise.
A senior retail source expressed doubts about Ashley having a clear turnaround plan for Boohoo at all and added that given Boohoo brands compete with Frasers, it might be a way to reduce competition by either selling the business for parts or putting it into administration.
While one analyst said the recent events surrounding both retailers aren’t surprising at all as they pointed out Frasers’ history with Debenhams and more recently the failed attempt at buying luxury fashion retailer Mulberry.
They added: “This is quite typical when Mike Ashley takes a stake in a business, and I’m not surprised this is happening to be honest because he has a track record and a history of doing this with things like Debenhams and Mulberry. This is the way he agitates and operates. But the reality is the performance at Boohoo has not been good and the corporate governance has not been good, so the points he makes are perfectly fair.
“Normally, they don’t give their hands away in cases like these, in terms of what they are after, so it’s not surprising that Ashley hasn’t actually said what he does want to do. But you don’t quite know what the debt situation in the business is, so he’s got to stabilise the ship first and see what you can do.”
Shore Capital analyst Clive Black says, if successful, Ashley’s first order of business will be making some people-related changes at the top of Boohoo.
“Subject to a positive shareholder vote, Ashley would put the cat amongst the pigeons at Boohoo. So, one would imagine quite a clear outcome, rotation of the senior management team… not least the role and presence of Mr Kamani and his kin.
“Focus and pace may step up with decisions around the Boohoo portfolio, noting a process of sorts is underway, plus action on the long list of complaints made by Frasers directed at Mr Kamani.”
Black also raises concerns over whether Ashley will be able to effectively lead both Boohoo and Frasers at the same time.
“From assortment to supply chain, operating processes to broader strategic steps and alignments, change may feature, or at least be sought. Quite how Boohoo and Frasers may interact would be interesting, hence, the pressure on the senior independent director on the Boohoo Board –could Ashley ride the Boohoo and Frasers horses at the same time?
“All that said, if successful, will the Boohoo board permit such steps, noting the Chair controls the non-executive directors… all of which would make for a battle royale.
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