In a dramatic turn of events, Mike Ashley, the founder of Frasers Group, is trying to take charge of Boohoo, an online fashion company that has been struggling. Frasers Group owns 27% of Boohoo, and they believe that Ashley is the best person to lead the company into a brighter future. This is not just about business; it’s about making sure Boohoo survives in a tough market.

The Call for Change

Recently, Boohoo announced that its current CEO, John Lyttle, would be leaving the company. In response, Frasers Group sent a letter to Boohoo’s board asking for an emergency meeting of shareholders. They want to vote on appointing Mike Ashley as the new CEO. The letter stated that Ashley has the experience and skills necessary to replace Lyttle quickly. Frasers Group believes that appointing Ashley, along with restructuring expert Mike Lennon as a director, is crucial to turning Boohoo’s situation around.

Boohoo’s Response

Boohoo is currently reviewing Frasers Group’s request. They said they would make another announcement soon, but in the meantime, they advised shareholders not to take any action. On the day the news broke, Boohoo’s shares rose by almost 4%, indicating that some investors were optimistic about the changes being proposed.

Challenges for Boohoo

Boohoo owns several well-known brands like PrettyLittleThing, Karen Millen, and Debenhams, but it has faced many challenges in recent months. The company has seen its losses widen and sales drop as competition heats up, especially from rival companies like Shein, a popular online retailer based in China. This year, Boohoo has cut over 1,000 jobs and taken on a large new debt of £222 million. Although Boohoo’s shares soared during the pandemic when more people shopped online, the company’s stock has lost a staggering 90% of its value over the past five years.

A New Strategy Ahead?

Following Lyttle’s announcement, Boohoo revealed that it was launching a strategic review of its brands. This could lead to a major restructuring of the company, including the possibility of breaking it up into smaller parts. Lyttle, who came from Primark in 2019, has agreed to stay on until a new CEO is found.

Some thought Umar Kamani, the 36-year-old founder of PrettyLittleThing and son of Boohoo co-founder Mahmud Kamani, would take over as CEO after Lyttle’s departure. However, Ashley’s sudden push for control could complicate Boohoo’s plans for leadership.

Frasers Group’s Concerns

In their letter, Frasers Group criticized Boohoo’s management, particularly regarding the company’s debt and the potential split of the business. They expressed concern that the current board has lost its ability to effectively manage Boohoo’s operations. According to the letter, the only way forward for Boohoo is to bring in new leadership that can provide a fresh perspective.

Ashley had previously sought a position on Boohoo’s board before Lyttle’s resignation but felt the company was not responding quickly enough. Frasers Group stated that they recognize when a company is delaying necessary actions and that this kind of behavior is no longer acceptable, especially given the challenges Boohoo is currently facing.

A Difficult Year

This is not the first time Boohoo has faced difficulties. The company has been under scrutiny for allegations regarding the treatment of workers in its supply chain. There were reports in 2020 that suppliers in Leicester were paying workers as little as £3.50 an hour. Although Boohoo initially denied these claims, an independent report later confirmed that the allegations were largely true. As a result, some shareholders are now seeking over £100 million in compensation due to the decline in the company’s shares.

Recently, Boohoo reported that its adjusted profits fell by a third to £21 million in the six months ending in August. Sales dropped by 15%, leading to a decrease in revenues. This news came alongside Lyttle’s announcement that he would be stepping down.

Looking Ahead

Analysts at Shore Capital have suggested that the situation between Ashley and Boohoo’s board could lead to significant changes. They advised shareholders to sit back and enjoy the unfolding drama, perhaps with popcorn in hand.

Mike Lennon, the proposed director and a familiar face to Ashley, has worked closely with him in the past. He was appointed this year to help manage two companies that Frasers Group acquired from JD Sports.