Now worth close to £2bn, fast-growing fashion outfit Boohoo Group PLC (LON:BOO) is preparing itself for its next growth surge with a leadership overhaul.
It is dispensing with the slightly unusual joint chief executive (CEO) model, with one of the joint CEOs – Mahmud Kamani – taking on the role of executive chairman, while the other half of the joint-CEO partnership, Carol Kane, will remain on the board in an executive director capacity.
READ: boohoo up as it poaches Primark’s chief operating officer to become its chief executive from March 2019
John Lyttle, the chief operating officer of high street fashion firm Primark, will take over the day-to-day running of the business with effect from March 15, 2019, sparking speculation over a possible new direction for the retail giant.
Lyttle’s expertise may be in fashion retailing but he is very much on the bricks and mortar side of things; Primark, famously – or infamously if you are a shopper marooned in outer Piddlington-on-the-wold – does not have an online presence.
The fact that Lyttle will not be able to start his new gig until mid-March of next year, indicates that boohoo is very keen to get him on board; so does the pay package, which could see him earn an annual bonus of 1.5 times his £615,000 annual salary, plus up to £50mln in free shares and a 5% pension contribution.
“Combining John's skills with those of Mahmud and Carol will enable a step change into a new era for the group,” claimed Peter Williams, the non-executive chairman, who will vacate the chair to make way for Kamani in March.
The online retailer said the management overhaul is “designed to support the journey of the group through its further international expansion”.
Founded in Manchester in 2006, the e-commerce group started life as boohoo.com, targeting young, value-orientated customers.
In early 2017, the group extended its customer offering through the acquisitions of the PrettyLittleThing and Nasty Gal brands.
The acquisitions saw it grow from a single brand, into a major multi-brand online retailer, leading the fashion e-commerce market for 16 to 30-year-olds around the world, the retailer bragged.
Today, the boohoo group sells to more than 9.8mln customer accounts across all its brands in almost every country in the world.
It is probable that Lyttle will be charged with managing the logistics of such a sprawling empire; as broker Peel hunt observed in a ‘buy’ note, “the next leg of growth will require a greater degree of internationalisation and overseas infrastructure”.
WATCH: Spreadex's Connor Campbell on 'game-changing' Amazon-Whole Foods deal
"Our next priority for Boohoo is to ensure we have world-class infrastructure and technology in place and we believe John is the right person to lead that journey," Kamani and Kane said in a joint statement.
Kamani’s role will evolve to focus on the long-term strategic direction for the boohoo group while co-founder Kane will continue to be the company’s creative muse and will oversee the development of the “product proposition” – management jargon for what is sold, how it is sold and at what price.
Lyttle’s defection from Primark has sparked some speculation that boohoo could move into the bricks and mortar market, and while it is not unheard of for online giants to invest in establishing a physical presence – as per Amazon’s US$13.7bn acquisition of Whole Foods Market – it would be an unlikely move for a company that included in today’s announcement a statement that “this is a hugely exciting time for the group as the fast fashion market continues to shift online”.
So, although Primark has always looked out of place among the Associated British Foods portfolio of grocery brands, sugar businesses, agriculture operations and ingredients makers, a Whitbread-style Costa Coffee sale of the Primark brand to boohoo seems unlikely.
READ: Whitbread shares froth higher as it agrees to sell Costa coffee to Coca-Cola for £3.9bn
“John Lyttle, as the COO of Primark Stores, brings significant experience of scaling a high growth model, particularly in sourcing and buying. While Primark is a store-based model, it has very similar characteristics to Boohoo, despite different channels. The signal of intent is to match Primark’s success in taking Boohoo to a £7bn turnover business, just as he did at Primark,” suggested Liberum Capital Markets, a long-time fan of the stock.
The broker believes the long-term incentive plan programme should excite investors for its ambition.
“A CAGR [compound annual growth rate] of less than 10% over the next five years yields no value to John Lyttle. The maximum payout is £50mln of gross value before tax at the end of the five year performance period in the event of achieving a CAGR of at least 23% (vs our current forecast of 22%),” the broker noted.
“For example, if the starting market capitalisation was £2bn it would have to increase by at least 60% or £1.2bn to £3.2bn to create any value at all for the CEO-designate. To achieve the maximum £50mln (before tax) the market capitalisation would have to increase by £3.6bn or by 180% to £5.6bn. Such an outcome would mean the £50mln represented approximately 1.4% of the increase in the market capitalisation,” the broker calculated.
So my @boohoo delivery came this morning for Ibiza. I opened the box to find a tooth pic, dirty cotton bud in the box, hairs everywhere a dirty makeup wipe and the shoes to be broken and already worn. Joke not to mention how unhygienic. Mortified ???? pic.twitter.com/fgg4DgWsdN
— ashleighjayne (@Ashleighrob_x) September 10, 2018