The boss of Boohoo and Debenhams could collect almost £150m in shares if he significantly boosts the value of the struggling fashion group, which is struggling with falling sales.
Debenhams Group said on Thursday that Chief Executive Dan Finlay is in line to receive £148.1m in stock over three years’ time, as part of an incentive scheme for top bosses worth more than £200m.
The plan comes as Debenhams Group said sales fell 23% to £297m in the six months to August 31, led by a 41% drop in sales of its “youth brands”, which include Boohoo and Pretty Little Thing. Sales of its Karen Millen brand fell 31%.
Sales at the group’s Debenhams division – which now runs as an online marketplace and also includes brands such as Oasis and Warehouse – saw sales rise by 20%.
The company said it had reduced pre-tax losses to £2.5m from £130m last year after cutting costs by £160m. It hopes to reduce costs by a further £60 million after exiting a warehouse in Daventry and the US and putting another warehouse in Burnley up for sale.
The group is struggling to revive sales after a boom during the Covid pandemic when high street shops closed, followed by a slowdown in recent years amid new competition from retailers such as Shein and Teemu. It has put its Pretty Little Thing brand up for sale.
The group – which was rebranded from Boohoo to Debenhams this year – said it was abandoning the existing management reward scheme following a tussle between Boohoo’s founders and shareholders over bonus payments.
Under the new plan, the share price should reach an average of £3 over a 30-day period over three years, valuing the company at £4.2 billion, 25 times its value when markets opened on Thursday.
To receive the full payment of the £222.2m shared between several executives, the share price must remain at that level for the next two years.
In addition to the £148 million for Finlay – who becomes group chief executive in 2024 – the company’s finance director, Phil Ellis, is in line for up to £14.8 million. The rest will be shared with an undisclosed group of other management. Executives could still share £21 million if the share price reaches a minimum of 60p.
The fashion group’s billionaire founder Mahmoud Kamani will not take part in the scheme.
The latest reward scheme comes after controversies over pay to executives at Boohoo.
Last year the group backed out of plans to pay £1 million in bonuses to three top executives despite reports of rising losses and debt.
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In 2023, shareholders approved a “growth share plan” under which the then chief executive, John Little, could receive a maximum of £50m in Boohoo shares, part of a total £175m payment to executives, if the company’s share price reached 395p.
The group said it would not seek shareholder approval for a new management awards scheme because of concerns that Frasers Group, the conglomerate controlled by Sports Direct founder Mike Ashley, would interfere. Frasers is its largest shareholder, with around 30% of the shares.
“A major competitor which is a significant shareholder of Debenhams seeks to disrupt the growth strategy and operations of Debenhams Group rather than maximize its future success”, Debenhams said, pointing to Frasers’ previous vote against an attempt to officially change the group’s name from Boohoo Group to Debenhams.
Arin Chikri, an equity analyst at Hargreaves Lansdown, said: “Boohoo is the right word to describe how its investors must be feeling now, with its shares down about 96% over the past five years.
“Despite this, and in typical poor corporate governance fashion for Boohoo, it has sidelined its investors by announcing a new compensation plan for the management team, without shareholder approval. As a result, management is under pressure to actually deliver on its turnaround plan.”
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