Make-your-mind-up-time approaches for Boohoo’s shareholders in the great showdown with Mike Ashley. The Sports Direct maestro wants a seat on the Boohoo board for him and a mate, to go with the 27% shareholding his Frasers Group holds in the struggling online retailer. The vote is on 20 December and, naturally, is being preceded by an entertaining round of back-and-forth insults.
This is a scrap one wishes it was possible for both sides to lose. Boohoo, with a share price down 90% in five years, certainly deserves a shake-up that a boardroom bruiser in the Ashley style might deliver. The environment for online clothing pioneers has been turned upside down by the arrival of Shein and others, but Boohoo has added mistakes all of its own. In short, the company seems to have bought a heap of brands and labels, including Debenhams, Oasis, Warehouse, Karen Millen and Burton, without having a decent plan to manage the sprawl.
Thus Ashley’s diagnosis of a “catastrophic mess” at Boohoo is a reasonable assessment. “I see panic-driven mismanagement resulting in reckless decisions that are obliterating shareholder value and jeopardising the company’s future,” he adds for good measure. Yes, in managing brand-sprawl, Frasers’ record is vastly superior, notwithstanding last week’s profits warning.
But the problem here is obvious. Next week’s vote is not on whether Boohoo has shot itself in the foot. It is to decide if Ashley and an associate should be appointed to the board to help fix the business. The bottom line is that he cannot possibly be regarded as an unconflicted party. For starters, Frasers Group, 73%-owned by Ashley, also owns 24% of Asos, Boohoo’s direct rival. And it also, obviously, competes directly with Boohoo in its day job of selling fashion goods.
Ashley’s answer is to promise that, for as long as he is a director of Boohoo, he “will not provide any confidential information about Boohoo to Frasers, take on any board position at Frasers, discuss Boohoo or its business with Frasers, or accept any board position at any competitor to Boohoo”.
Sorry, but that appeal defies common sense. Ashley is a man of many talents, but he cannot split himself in two. The fact that he no longer has a seat on Frasers’ board does not make an independent party if he is still the majority owner of the business. The appointment doesn’t fly.
Boohoo makes many other arguments, such as the idea that Ashley is seeking to disrupt Boohoo’s turnaround efforts, and that Frasers is “acting only in its own commercial self-interest”. That line of attack feels weaker than the conflict-of-interest point, but the germ is correct: Frasers is free to bid for Boohoo, valued at just £500m these days, if it wishes.
None of which should be taken as an endorsement of Boohoo’s early turnaround strategy under its new boss, Dan Finley. Frankly, the whole thing would be more convincing if co-founder Mahmud Kamani said his goodbyes, as opposed to being shuffled from executive chair to executive vice-chair.
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But a vote on Kamani’s exit is, possibly, one for another Frasers-requisitioned meeting. Next week’s poll is on Ashley’s appointment. Institutional Shareholder Services, the outfit that advises investors who can’t be bothered to think for themselves, has ticked the correct box on this occasion in backing Boohoo. Ashley should either bid, or be obliged to continue to agitate from outside.