Boohoo bosses mulling over break-up of business

Bosses at Boohoo are considering a break-up of the struggling fashion seller after pressure from shareholders to revive its fortunes.
The online retailer, whose core labels include PrettyLittleThing, Karen Millen and Debenhams, has suffered a steep fall in its share price and a widening of losses amid heavy competition and the revival of the high street after the pandemic.
A number of shareholders are understood to have urged the board to break up the Manchester-based group and spin off some of its better-performing brands in an attempt to boost the stock, which has fallen by over 85 per cent in the past five years.
• UK retail sales rise to two-year high in August
Sources suggested there was potential value in spinning off or selling Debenhams and Karen Millen, “both good brands”, and selling the young, fast-fashion brands such as Boohoo, BoohooMan and PrettyLittleThing. “The sum of the parts at Boohoo is greater than the current market cap,” one said. “Therefore, if you want to realise that you’ve got to do one thing, ultimately, which is to break it up.”
Insiders said there was no certainty that the group would be broken up or how it would ultimately be divided but that Mahmud Kamani and Carol Kane, its co-founders, were considering all options.
“There’s no surprise given where the share price is that [its bosses] are looking at all options for shareholder value,” one source close to Boohoo said, adding that Kamani was “listening to investor calls. He’s more aligned on this than anybody else.” The company is said to be waiting to assess its Christmas trading performance — the peak selling period for retailers — before finalising a strategy.
Boohoo, founded in 2006, was one of the fastest-growing retailers in Britain, riding on the wave of the online shopping boom. The company completed its initial public offering in 2014, with shares trading considerably above the 50p float price on the company’s debut in the junior Aim market of the London Stock Exchange. Valuing Boohoo at almost £600 million, Kamani netted £135 million and Kane £25 million from the flotation.
The retailer’s rise prompted an acquisition spree in recent years, snapping up the Misspap, Karen Millen and Coast brands in 2019, and in 2020 the Warehouse and Oasis brands. In 2021, Boohoo acquired familiar British high street names including Debenhams, Dorothy Perkins, Wallis and Burton out of administration.
However, the online-only group has suffered a dramatic fall from grace since the pandemic ended and shoppers returned to stores. It also has struggled amid heavy competition from new fast-fashion players such as Shein, the Chinese-founded online seller, as well as secondhand marketplaces such as Vinted and Depop.
The group built up net debts of £95 million in the year to the end of February — down from almost £6 million of net cash a year before — after losses widened 76 per cent to £160 million and sales fell to £1.8 billion. It was recently forced to close its US warehouse in Pennsylvania, which opened just last August, to boost its balance sheet ahead of a looming debt deadline.
Several investors have taken advantage of Boohoo’s weaker share price, including Mike Ashley’s Frasers Group, which has a 26 per cent stake. That is now more than Kamani, who holds about 12 per cent.
Frasers Group also has a large stake in Asos, a competitor to Boohoo. Asos recently sold a minority stake in the Topshop brand, which it bought in 2021, to boost its own balance sheet. THG, another online retail group formerly known as The Hut Group, is to spin off its tech services arm to try to fix its flagging share price.
Shares in Boohoo have lost a fifth of their value this year, but have rebounded in recent days and climbed 5.5 per cent in the past week to close at 29¾p on Friday.
Boohoo was contacted for comment.