Retail giant Frasers Group PLC (LSE:FRAS) has ripped into Boohoo Group PLC (AIM:BOO)’s mismanagement and “abysmal” trading performance that has caused the “continued value destruction” of the online fashion retailer.
In an open letter signed by company secretary Robert Palmer, Frasers, which owns a 27% stake in Boohoo, condemned the board, stating it has “lost its ability to manage Boohoo’s business and investment”.
To address Boohoo’s plummeting share price and declining profits, Frasers has proposed that the FTSE 100-listed group’s founder and figurehead Mike Ashley take over as chief executive.
Appointing Ashley “is the best solution to Boohoo’s leadership crisis,” which has been exasperated by the recent resignation of John Lyttle, said Frasers.
Frasers took a shot at Boohoo’s “failure to meaningfully engage relates to Frasers’ constructive proposal”, which has been tabled on numerous occasions, according to the open letter.
Frasers also criticised Boohoo’s recent debt refinancing, which was called “a step backward for the company and an appalling outcome for shareholders”.
“The new £222 million facility is severely short dated, seemingly more expensive than the previous financing arrangement and almost unquestionably leaves the company in a position of needing to undertake drastic corporate actions… in order to repay the term loan due in 10 months,” read the letter.
Frasers has requisitioned a general meeting of Boohoo shareholders to vote on Ashley’s appointment, alongside “experienced restructuring professional” Mike Lennon as director.
Boohoo said it is “in the process of reviewing the content and validity of the requisitions with its advisers. A further announcement will be made in due course”.
Shares in the online retailer rose almost 4% on Thursday, not vastly moved since last year when Frasers first took its stake, but down over 80% since three years ago.
** Update: Adds share price **