Boohoo chief executive John Lyttle is stepping down as the struggling online retailer begins a strategic review that could potentially lead to a breakup of the company.
The British fast-fashion company said it believes Boohoo, which also owns the Debenhams, Karen Millen and PrettyLittleThing brands, is “fundamentally undervalued” and there is potential to “unlock value” for shareholders.
Shares of Boohoo fell 9 per cent in early trading in London. The stock has lost about a quarter of its value this year.
The review comes as Boohoo reported that first-half revenue had plunged to £620 million (€746 million) from £729 million at the same time last year. Boohoo said it’s also signed a new £222 million debt facility to give it the “appropriate financing” for the next phase of its development.
Boohoo has had to weather a difficult five years since Lyttle joined from Primark, its much bigger rival. Before the pandemic it was hit by a damaging minimum-wage and safety scandal at supplier factories in Leicester, England. An independent review found that Boohoo had prioritised profit and growth and ignored “red flags” about labour violations, but cleared the company of any direct involvement.
Under Irish-born Lyttle, Boohoo also had to contend with the Covid pandemic, which initially boosted revenues as online shopping soared but then pared back rapidly as people returned to stores. Boohoo’s launch into the US has also been affected by high freight costs.
Earlier this year, Boohoo had to scrap a lucrative bonus plan amid reports of a shareholder backlash following ballooning losses.
Boohoo said on Friday that it has taken a number of “decisive and robust” strategic initiatives to improve operational efficiencies and reduce costs at the group in the past 18 months. It has also made progress in reinvigorating the Debenhams and Karen Millen brands, it said, which is why now is time to “review options for each division” to maximise value for shareholders.
Although Boohoo’s refinancing is a positive development, the new facility includes a £100 million term loan that is “repayable as soon as August 2025, which leaves relatively limited time for manoeuvre,” said Andrew Wade, an analyst at Jefferies. --Bloomberg
