Fast-fashion’s rivals face off after Ashley buys stake in Boohoo

Sir Philip Green is not everybody’s idea of a natural diplomat. The Topshop tycoon’s last few years in the public eye were characterised by snarling rows with politicians and journalists, as his business empire crumbled around him. Yet those who still deal with the one-time King of the high street report that the man in Monaco has mellowed.This gentler version of Green — Green 2.0, if you will — is now smack bang in the middle of a tense situation. Sources say the 72-year-old is acting as a referee between Mahmud Kamani, the domineering executive chairman of Boohoo, and Mike Ashley, the unpredictable tycoon behind the Frasers empire.
The rivalry between Kamani and Ashley, both 60, was reignited when Ashley’s Frasers Group — which owns Sports Direct, House of Fraser and luxury chain Flannels — built a 26.2 per cent stake in Boohoo.
The tensions at Boohoo come as the one-time titans of the UK’s fast-fashion industry wilt under the pressure from a foreign upstart. Boohoo and Asos, another of Frasers’ investments, have struggled to get to grips with competition from Shein, which sources cheap goods in China and flies them direct to consumers.
Sales at Boohoo and Asos have been stuck in reverse for more than two years. Without a return to profitable growth, tempers that have simmered behind the scenes may burst out into the open.
During the halcyon days of low interest rates, Boohoo and Asos were perceived as two potential winners in a rapidly shifting retail landscape. Online retailers, unburdened from the costs of running shops, were encouraged to focus on growth in the belief that profits would follow.
Asos started out in 2000 in north London as the website AsSeenOnScreen, selling copies of clothes worn by film stars, before finding its feet designing and selling fashion for young women. Kamani co-founded Boohoo with longstanding business partner Carol Kane in 2006, after years spent slogging away in Britain’s rag trade, but it wasn’t until after its float in 2014 that Boohoo really became a force.
A little over three years ago they appeared to have the world at their feet. When the pandemic finished off Green’s Arcadia Group, Asos paid £330 million for the Topshop, Topman and Miss Selfridge brands. Boohoo took the rump of the group with a £25 million deal for Burton, Dorothy Perkins and Wallis.Since then, the online upstarts have suffered a stunning reversal of fortunes. Soaring inflation eroded their paper-thin profit margins just as consumers headed back to the high street in droves. And then there was the emergence of Shein, which last year racked up $45 billion (£33.9 billion) of sales on its platform – six times that of Asos and Boohoo combined.It was against this brutal backdrop that Frasers swooped.
Ashley’s group, now led by his son-in-law Michael Murray, began building its 21.1 per cent stake in Asos two years ago. It started buying up shares in Boohoo in June last year. Murray wanted to use these stakes as leverage to persuade Asos and Boohoo to offer Frasers Plus, the group’s buy-now, pay-later service, as a payment option. That wish remains unfulfilled.
Meanwhile, Ashley has made several suggestions on how Boohoo should deal with an upcoming £325 million refinancing, including the possibility of him underwriting a rights issue. Again, Boohoo’s board has not taken him up on it.
“Mike is making plenty of suggestions, but boards can’t deal with suggestions, they deal with concrete proposals,” said a source close to Boohoo’s board. “He is putting everybody in a difficult position.” That’s certainly true in the case of investment bank Jefferies, which acted as corporate broker to both Frasers and Boohoo. Jefferies recently resigned as broker to Boohoo in the belief its position could become untenable.
A source close to Frasers said it was a “supportive shareholder” to all of its strategic investments and worked “collaboratively and amicably across different workstreams”.
The trail of bad blood between Ashley and Kamani can be traced back to the collapse of Debenhams in 2020. Ashley spent months haggling over a deal to buy the department store chain out of administration, which would have provided a route to recoup some of the estimated £150 million he had sunk into the chain by buying shares over the years. But advisers running the process eventually ran out of patience, selling the Debenhams brand and website to Boohoo for £55 million.
Ashley exacted a measure of revenge the following year in unexpected fashion. When Missguided, a struggling fast-fashion brand, went up for sale, Kamani was the natural buyer. After lining up the deal with advisers from Teneo, Kamani tried to chip down the price at the last minute. The advisers then put in a call to Ashley’s camp in the belief he would not be able to resist the temptation of getting one over on Kamani. Apparently, they were right. Frasers gazumped Boohoo with a £20 million bid for Missguided the next day.
Trust is in short supply.
“Mahmud has reacted about as well as you’d expect to a rival becoming his biggest shareholder — it’s been more tense behind the scenes than anybody realises,” said a source close to Boohoo.
In May, Ashley was infuriated by the attempt of Boohoo’s board to pay £1 million bonuses to three senior executives, including Kamani himself, even though they had missed pre-agreed targets that would trigger the payouts. Ashley forced the board into rowing back from the plan.
“Things have gotten quite excitable but — at the moment — there are no dramas [between them],” said another source.
From his yacht in Monaco, Green is understood to be offering counsel to the sparring tycoons.
Kamani, who once supplied Topshop, is a long-standing friend of Green’s and remained loyal during his reputational crisis at the height of the BHS scandal. Green’s relationship with Ashley is more complicated. Despite initially taking Ashley under his wing, Green clashed with his one-time protégé over deals for HMV and Debenhams. When Green’s empire teetered on the brink of collapse, Ashley goaded his former pal by publicly offering him a £50 million loan.
A source close to Kamani sought to downplay Green’s role in his relations with Ashley and said the pair speak directly and constructively.
Boohoo could certainly do with fewer distractions. Looming over both it and Asos is Shein, which has developed a rapidly responsive supply chain — spanning thousands of densely clustered factories in Guangzhou, southern China — that helps it get clothes on sale as little as one week after they’re designed.
Shein also undercuts the competition. Its lower prices are, in part, down to its practice of shipping individual consignments direct to consumers’ homes, meaning their value falls below the £135 threshold at which import duties are levied. Superdry boss Julian Dunkerton last week called on the Treasury to close the loophole.
Last year, Boohoo’s sales fell 17 per cent to £1.46 billion and write downs pushed it to a pre-tax loss of £159.9 million. To kick-start a turnaround, Kamani has called on the services of his high-living son, Umar, who used to run PrettyLittleThing. The hope is that Dubai-based Umar, who has spent his summer cavorting on jet skis with Manchester City striker Erling Haaland, can turn around what was once one of Boohoo’s fastest-growing brands. Meanwhile, Boohoo is closing in on a refinancing of its £325 million revolving credit facility (RCF), effectively a corporate overdraft. Boohoo is likely to be left with a smaller facility at a higher rate of interest, secured against some of its assets.At an investor day later this year, Boohoo will emphasise the potential of its more “Shein-proof” brands, such as Oasis and Karen Millen. Management will also talk up the prospects of Debenhams, whichhas been relaunched as a global online marketplace.At Asos, sales dropped by 18 per cent to £1.5 billion in the six months to March 3. The retailer, led by chief executive José Antonio Ramos Calamonte, has given itself some breathing space by partly refinancing its debt through the sale of a 75 per cent stake in Topshop to Anders Holch Povlsen for £135 million. Povlsen is a Danish billionaire and the largest shareholder in Asos. He, too, has clashed with Ashley in the past.
To try and counter Shein, Asos has reduced lead times to as little as three weeks on 10 per cent of its own brand sales.
One Asos shareholder said they believed both Asos and Boohoo were through the worst of the impact from Shein. Others are unconvinced, believing a merger would be the logical end point.. “The only real play now is to shove Asos and Boohoo together because they are both going nowhere,” said a senior industry source. “But you’ve got Ashley, Kamani and Povlsen… it’s like oil and water.”
Mike Ashley’s investment in Asos brought the Frasers boss back into the orbit of Danish billionaire Anders Holch Povlsen, a major Asos shareholder since 2010.
Povlsen, 51, and Ashley first crossed swords over Jenners department store in Edinburgh. Since 1895, the store had traded from a stunning Victorian building on Princes Street. It was acquired by House of Fraser in 2005, and Povlsen bought the building in 2017.
A year later, Ashley acquired the stricken House of Fraser chain and then fell out with Povlsen over a failure to agree a lease for Jenners. Michael Murray visited Povlsen’s home in central London to try to thrash out a deal, without success. The store’s historic signage was unceremoniously removed in the ensuing row.
“Anders lost his s**t when the signs were taken down,” said one of the Dane’s associates. When Jenners shut for good in 2021, both sides blamed the other. It is understood that Ashley is no longer on speaking terms with Povlsen.