Boohoo boss steps down as group contemplates break-up

Boohoo, the fashion ecommerce group that once soared to a valuation near £4 billion and rescued high street names such as Debenhams and Karen Millen from administration, is facing a reckoning of its own.
After weeks of investor discontent, the company has announced a strategic review of options “to unlock and maximise shareholder value”, raising the prospect of a break-up of the mini retail empire whose collection also spans PrettyLittleThing, Dorothy Perkins, Burton, Warehouse and Wallis.
The review has set the stage for a potential showdown between Mike Ashley, Boohoo’s largest shareholder via Frasers Group, and Mahmud Kamani, Boohoo’s co-founder and group executive chairman.
In a wide-ranging update to the London stock market, Boohoo also announced the surprise departure of John Lyttle, its chief executive for the past five years, a £222 million debt refinancing and a “disappointing” half-year trading update, which left City analysts cutting forecasts and sent the shares down another 8.4 per cent at 29¼p on Aim, the junior market.
The latest drop extended share losses over the past five years to about 89 per cent, while the uncertainty of the strategic review and the departure of Lyttle, 57, marks a new low for the Manchester-based group, which has previously batted away suggestions that the “Boohoo bubble” has burst.
Founded in 2006, Boohoo became one of the fastest-growing online fashion retailers in Britain before floating on the London Stock Exchange in 2014 for £600 million, making fortunes for Kamani and Carol Kane, the other co-founder.
The success provided a launchpad for an acquisition spree that included Karen Millen in 2019 and Debenhams two years later.
Yet the Debenhams deal set the stage for potential tensions with Ashley. The tycoon had invested £150 million buying shares in the department store chain before its demise. He made multiple bids for the business but ultimately lost out to Boohoo, which picked it up for £55 million.
More recently, Boohoo has struggled with renewed competition from a post-pandemic pick-up on the high street and new ecommerce entrants, particularly Shein, the Chinese-founded online seller which has undercut rivals and is exploring its own London float. Second-hand market places such as Vinted and Depop have put further pressure on Boohoo and its struggling listed competitor Asos.
Asked about the possible break-up of Boohoo, Lyttle said: “We’re quite happy as we are if people just give us the correct valuation. The whole part of this process is just ‘Give us the correct valuation’. So it’s not about a break-up, it’s not about a sell-off, it’s just about valuation.”
Lyttle said investors were “looking at us as a young fashion business” and failing to “fully appreciate the diversification we’ve made over the last few years”, taking Karen Millen, a premium womenswear brand, to a “pure play” profitable and growing label, particularly in the US, and resurrecting Debenhams as an online department store. “I don’t think we get any recognition for that. We’ve also had a hugely successful project in Sheffield where we’ve invested £125 million in automation in our warehouse.”
An insider said: “This is a sum of the parts story. Could the sum of the parts be worth more than the whole?”
In a statement, Kamani said: “The business has evolved over the 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 “everything on the table”, it is possible the review could ultimately lead to a delisting of Boohoo, whose joint financial advisers are HSBC and Zeus Capital.
Yet it has been suggested the business could end up going in a totally new direction. It is understood one major Boohoo shareholder has suggested there should be a merger of Asos, down about 88 per cent over the past five years, and Boohoo. However, Asos is understood to be against this option as it does not wish to be associated with Boohoo’s brands.
Boohoo is understood to see most value in Debenhams and Karen Millen, raising questions over whether to spin those or the younger brands off.
Analysts at Peel Hunt, the City investment bank, said: “A break-up is possible, but in our view would not answer the questions facing the younger fashion brands.”
Boohoo’s future is likely to be determined by Frasers, which has become the largest shareholder with a stake of about 26 per cent, and Kamani, who along with his son Umar has about 15.5 per cent of the shares. Kane retains about 1.6 per cent, Schroders about 4.5 per cent and Camelot Capital — headed by Will Barker, who also sits board of the Asos — has a minority stake.
Asked whether Boohoo was being pressured by Frasers and was vulnerable to being raided by its rival, Lyttle said: “I don’t think anybody in particular is pushing. I think this is a group decision. I think every shareholder will be looking at value and it’s equal for everybody.”
Nick Bubb, the veteran retail analyst, said: “Ashley will clearly want Debenhams, as he was so mad that he missed out on that a few years ago. I think he saw the stake [in Boohoo] as an each-way bet: either the business would recover or he would be in pole position in a break-up.”
Yet Jonathan De Mello, a retail analyst, said Ashley may be more interested in Karen Millen, as it “remains a high-end, desirable brand” which could sit alongside other high-end brands in Frasers’ portfolio.
Boohoo’s restructuring takes place amid reports of simmering tensions behind the scenes between Kamani and Ashley, which could resurface in the coming months.
Boohoo was forced to retract its multimillion-pound executive bonus payouts in May and to pull a vote on its incentive plan after a backlash from investors.
There is said to have been a FaceTime row between the pair recently. Sir Philip Green, the former “king of the high street”, was, somewhat surprisingly, said by one source to be the middleman trying to restore calm between the two.
Ashley has become a titan of the fashion retail sector, buying up depressed brands, while Boohoo has come under scrutiny over its supply chain practices.
Sources close to both sides played down suggestions of a row between the two. Ashley and Frasers were approached for comment.
In a brief trading update for the six months to the end of August, Boohoo said group revenue fell 15 per cent to £620 million year-on-year and adjusted earnings fell to £21 million, compared with £31 million a year earlier.
With half-year results due early next month, Boohoo said it expected a stronger earnings performance in the second half of the year compared with its first, despite further investment in its brands.
Analysts at RBC said it was a “softer than expected” first half, “owing to its performance in the US and rest of world” and a “weak performance for its youth brands”. But it “continues to see considerable growth for its Debenhams external marketplace, with an additional 5,000 brands signed”.
Analysts at Jefferies said Boohoo’s “sparse” outlook statement “implies a potentially material downgrade” to 2025 consensus earnings forecasts. They added: “While the refinancing is a positive development, we note the c. £100 million term loan is repayable as soon as August 2025, which leaves relatively limited time for manoeuvre.”
As part of Boohoo’s £222 million debt refinancing announced on Friday, a consortium of its existing banks have agreed a new facility, which Kamani said shows “their confidence in the group”.