In the weeks since Boohoo publicly announced plans for a hostile takeover of Revolution Beauty, what followed has been a war of words fought on the battlefield of the London Stock Exchange, with each party accusing the other of corporate wrongdoing and “self-serving” behaviour.
The sniping came to a head at Revolution’s chaotic AGM on June 27, where despite Boohoo’s best efforts to foist Alistair McGeorge and Neil Catto on to the Revolution Beauty board, the embattled health and beauty retailer managed to fire and then rehire Bob Holt, Elizabeth Lake and Derek Zissman as chief executive, chief financial officer and chair of the board respectively.
Since then, public statements have mostly fallen silent. Through all of this, Boohoo’s interest in and future plans for the troubled beauty retailer have remained unexplained.
This isn’t the first time Boohoo has tried to enter the lucrative world of beauty retail. The fashion etailer first tried to expand its beauty and home offering when it bought department store chain Debenhams in an eleventh-hour deal costing £55m.
However, as Debenhams moved to become an online-only retailer, major beauty brands like Chanel and Yves Saint Laurent stopped selling through the website citing the disadvantages of not having a physical store estate. Debenhams went on to suffer losses in the first year under Boohoo’s ownership.
A month after the Debenhams acquisition, Boohoo went on to acquire former Arcadia brands Burton, Dorothy Perkins and Wallis, which also suffered losses under the new ownership. At the time the fashion giant blamed the results on a slump in consumer demand and rising return rates during the coronavirus pandemic.
Investec Bank analyst Kate Calvert says Boohoo’s sudden interest in Revolution Beauty may be an attempt to leverage the Debenhams acquisition and right its wrongs.
“Debenhams had a highly successful beauty business, in addition to a number of own-label fashion brands. However, the online retailer struggled to get everything it hoped for out of the acquisition as Debenhams catered to a completely different demographic.
“Revolution Beauty has proven to be a good beauty brand at its core and Boohoo may be looking to leverage its supply chain expertise if it does go on to take control of the brand.”
A senior beauty retailer says many fashion players are looking to make a play in the world of health and beauty. She attributes this to the ‘lipstick effect’ and believes the resilience and growth of the sector during the cost-of-living crisis has only piqued more interest from struggling mid-market fashion brands looking for steady income streams.
This is backed up by data from Retail Week’s analyst team, which predicts the UK health and beauty market will grow at a compound annual growth rate of 3.9% to 2026/27 as retailers fight to gain market share in this lucrative category.
The Business of Fashion and McKinsey believe that globally the beauty industry could be worth $580bn (£457bn) in sales annually by 2027.
Boohoo’s attempted takeover of Revolution Beauty begins to make sense in that context, as the fast-fashion etailer eyes another gateway into the beauty world.
Boohoo group trading has been hit by the cost-of-living crisis and softening consumer demand, with profits halving to £63.3m and sales dropping 11% to £1.77bn in the financial year ending February 2023.
While Revolution Beauty is not in the rudest financial health, having slipped to a £7.4m loss in the first quarter of the year, sales jumped 60% driven mostly by sales through high street giants Boots and Superdrug.
The beauty specialist said its trading 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”.
Foundation of the feud
As both brands went for each other’s throat in heated public statements, Revolution Beauty called Boohoo a hostile shareholder and questioned its future plans for the beauty brand, saying Boohoo’s actions were more telling of its own performance and “value-destructive, opportunistic and self-serving, as well as not being in the interests of the company’s shareholders as a whole”.
Boohoo, however, has kept its cards close to its chest, revealing little to no details of its intentions with the brand – perhaps even from those on its side.
One source close to the fashion giant seemed unsure of whether there was a takeover or buyout happening, let alone what strategy Boohoo might employ to integrate Revolution Beauty into its group if it did take it over.
As Boohoo accused the beauty brand of corporate wrongdoing and hiding the terms of the free share awards in its annual report, Revolution Beauty replied in yet another public statement saying it finds the fashion etailer’s accusations “extremely ironic” and brought attention to Boohoo’s “long and well-documented track record of substandard corporate governance, and legal, reputational, supply chain and shareholder engagement issues”.
An industry insider questions the circumstances under which Boohoo bought its 26.6% stake in Revolution Beauty. He believes the stake was ill-advised at a time when Revolution Beauty’s shares were suspended, as the promise of any returns for shareholders wasn’t guaranteed. Revolution Beauty’s “punchy responses” are a lesson for Boohoo that “people in glass houses shouldn’t throw stones”, he adds.
While the war of words has simmered down to an ill-tempered truce, both parties will be preparing themselves for hostilities to resume in earnest at the requisition meeting later this month or in early August. While a Boohoo takeover seems the most likely outcome, the longer-term fate of Revolution Beauty looks far from assured.
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