What is going on with Revolution Beauty and Boohoo?

The major retail story in the last week has undoubtedly been the drama around Revolution Beauty and Boohoo.

In short, Boohoo, being the largest shareholder in Revolution Beauty, has been attempting to oust the current Revolution Beauty board and replace them with its own picks, something that Revolution is not particularly keen on.

To get to the bottom of this dispute we first need to discover how both companies got to this position, what they have both said on the dispute and where it goes next.

How did we get here?

Revolution Beauty is a UK based beauty company which was set up in 2014 by Adam Minto and Tom Allsworth. It first became a publicly traded company in June 2021.

Boohoo is a fast fashion online brand which has an active acquisition business model. In 2017 it acquired online competitor Pretty Little Thing and has also bought businesses such as Nasty Gal and MissPap since.

In August last year Boohoo announced a strategic investment into Revolution amounting to around 7% of the shares in the business. At the time Boohoo stated: “The investment builds upon the existing relationship between Boohoo and Revolution Beauty, under which Revolution Beauty products are sold through several of the group’s direct to consumer brand websites and its online digital department store, Debenhams.”

In November of the same year Boohoo increased its shareholding in Revolution up to about 26% making it the largest shareholder in the company. This was also around the time that Revolution founder Minto had left his role as CEO after an independent accounting inquiry into why the company missed releasing final results for the year.

What is the current situation?

That brings us to the present day with Boohoo now seeking to effectively take control of Revolution. Boohoo is set to vote against the reappointment of Revolution’s CEO Bob Holt, chair Derek Zissman and CFO Elizabeth Lake at its AGM next week. Boohoo also requested that the existing board of Revolution Beauty not proceed to appoint Rachel Maguire and Matthew Eatough as directors.

In their place Boohoo is looking to appoint former New Look boss Alistair McGeorge, former Boohoo CFO Neil Catto and ex-THG Beauty CEO Rachel Horsefield in place of the current board. Boohoo stated: “As Revolution Beauty’s biggest shareholder, Boohoo is grateful to Bob, Derek and Elizabeth for stabilising the business.

“However, as Revolution Beauty transitions to its next phase, where the focus must switch to growth, Boohoo believes a senior leadership team with the right retail, e-commerce and consumer brands experience is required to deliver shareholder value.”

Revolution responded to this by noting Boohoo’s request for requisition and urging its shareholders to take no action.

Revolution stated: “Boohoo’s actions appear to be a cynical attempt to seize control of the company without financial outlay nor any compensation to Revolution Beauty shareholders, and would appear to be a reckless strategy unless Boohoo were confident of support from other shareholders of the company.”

In response to the proposed appointment of Horsefield, Revolution noted that she formerly worked for THG, a company that it had ceased commercial relationships with. It also stated that it did not believe McGeorge and Catto had the requisite experience to run a business in the beauty sector.

Revolution also reminded shareholders of the experience that non-executive director Jeremy Schwartz has. He spent 12 years at L’Oréal, including as managing director in the UK responsible for all consumer, luxury, salon and active cosmetics divisions, and five years as chairman and CEO of The Body Shop, which has some 3,000 stores in 70 countries.

Separate from this but still relevant, Revolution also announced that it would potentially be taking legal action against Minto for “breaching his fiduciary, statutory, contractual and/or tortious duties to the company”.

Boohoo also faced its own separate issues alongside this after a third of its shareholders voted against its directors remuneration report, although all members of its board were reelected comfortably.

The rationale behind the move from Boohoo to appoint its own directors was that the company must be focused on returning to growth and return to growth is exactly what Revolution did.

In a trading update for the first three months of the financial year Revolution announced its sales were up 60% year-on-year and its EBITDA at constant currency was £3.5m, up from a £7.4m loss. It then stated that it hoped these results would reassure shareholders that change was not necessary.

Where does it go from here?

The answer to that question is currently unclear. All we know is that Revolution is attempting to postpone its AGM as it attempts to fight against Boohoo’s plans. The AGM was originally scheduled for Tuesday 27 June 2023 and Revolution is hoping to move it to late July or early August 2023 to give itself a chance of fighting Boohoo’s proposal.

It is also unclear what the rest of the shareholders think. Boohoo will need vast support from other shareholders as it only holds just over a quarter of the company, and the recent success in trading may help Revolution’s cause.

The only thing we do know for certain is that this dispute is far from over.