The Irish boss of Boohoo could be in line for a bonus worth as much as £50 million (€56 million) as the fast fashion retailer seeks to overhaul its management incentive scheme and put the business back on track after a slump in its share price.
The online retailer — known for its brands including Pretty Little Thing and Nasty Gal, and for tie-ups with celebrities including Kourtney Kardashian Barker and Megan Fox — has announced a new performance plan making it easier for the senior management team to hit targets.
Boohoo’s share price has halved over the past year from just over 98p to about 48p on Thursday, giving the company a market value of about £610 million, and sales have struggled in recent months as consumers have cut their spending.
The retailer said on Thursday there was “little or no value” in its existing incentive plans, as the targets were too difficult to achieve for leaders including the chief executive, Offaly man John Lyttle.
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Boohoo said in a statement to the stock market that its market value had significantly decreased “against the background of the unique and unprecedented set of macroeconomic and market headwinds experienced over the last three years”.
This was “despite the strong efforts of Boohoo’s executive and senior management”.
Under Boohoo’s new “growth share plan”, Mr Lyttle could receive a maximum of £50 million in Boohoo shares out of a total £175 million payout to executives, if the company’s share price reaches 395p, more than eight times higher than current levels — and remains there within a 90-day average window within the next five years.
Boohoo executives would start to receive initial payouts once the share price returned to 95p, close to the level it was at in February 2022.
Carol Kane, who co-founded Boohoo in 2006 along with the executive chairman Mahmud Kamani, would also receive a bonus under the new scheme, which will require shareholder approval.
A portion of the payout would be made available to Boohoo employees as well as senior leaders.
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The retailer said incentives were needed for the executives “responsible for driving business performance and delivering Boohoo’s strategic objectives”, and in order to retain and motivate bosses and staff.
Previous plans, designed to grow the company and drive up its market value, were first introduced when Mr Lyttle took over as chief executive. Under these plans, he would have only earned a maximum £50 million bonus if the company had achieved a market value of £6 billion — more than 10 times its current level – by March 2024.
Iain McDonald, chairman of Boohoo’s remuneration committee, said the incentives were needed to retain executives “particularly in an era where the recruitment of such quality is more competitive than ever before”.
Mr Kamani, who remains the company’s largest shareholder, said “these are extremely ambitious targets in a changed world” and called it “absolutely the right thing to do to align the interests of the management team and all of our hardworking colleagues with those of all of our shareholders”.
Analysts at broker Jefferies said “the terms of the plan look stretching enough”, but noted that shareholders had been consulted in advance, which “has presumably helped shape the plan”.
Boohoo’s sales dropped by 11 per cent over the crucial Christmas period after trading was knocked by longer delivery times and disruption to deliveries in the festive season.
Like its online rivals, including Asos, Boohoo has struggled to retain the high levels of sales it experienced during the pandemic, when many physical stores were closed for long periods during Covid lockdowns. — Guardian
