The online retailer Boohoo has raised “serious concerns” about the behaviour of the board at the bargain makeup brand Revolution Beauty after an extraordinary row in which three of its most senior directors were fired and immediately rehired.
The fast-fashion retailer Boohoo, which owns a 26.6% stake in Revolution, was among almost three-quarters of investors who voted to oust the makeup brand’s chief executive, Bob Holt, its chief finance officer, Elizabeth Lake, and its chair, Derek Zissman, at a shareholder meeting on Tuesday. However, they were reinstated after the meeting by an independent director, Jeremy Schwartz.
Revolution was set up in 2014 to launch a vast affordable makeup range aimed at young people and priced from £1. It has struggled on the AIM junior market since floating in July 2021 with valuation of almost £500m.
Boohoo wanted its own candidates to be appointed to the board to run Revolution. It said on Wednesday: “Boohoo fails to see how such a board can claim to be acting in the best interests of shareholders, and is instead self-serving, as demonstrated by its actions over the last 24 hours.”
Revolution hit back by describing Boohoo’s “hostile actions” as “value-destructive, opportunistic and self-serving, as well as not being in the interests of the company’s shareholders as a whole”. It accused Boohoo of trying to take Revolution over by stealth through a boardroom coup without making an offer for the business, and argued that its fortunes were “significantly improved, with business back on track”.
It was Revolution’s first annual meeting since its AIM market flotation. Its shares were suspended in September after the company’s auditors, BDO, raised concerns about its financial accounts and the company failed to publish its annual results for 2022. Trading in the shares resumed on Wednesday and soared by as much as 54% at one point.
Russ Mould, investment director at the stockbroker AJ Bell, said: “There’s nothing beautiful about the spat between Boohoo and Revolution Beauty. In fact it has turned downright ugly.
“A fashion for retail businesses to take stakes in their peers was always a recipe for friction, and Boohoo has certainly been throwing its weight around after taking a hefty stake in the cosmetics business.
“You can see why Boohoo built its stake in Revolution Beauty in the first place. The brand does have strengths, and spending on cosmetics is often fairly resilient in difficult economic conditions, while Boohoo offers Revolution Beauty a very useful sales channel.”
The online fashion retailer said it was still pursuing a boardroom clearout at Revolution and the appointment of a new board “with the right balance of skills and experience” – namely, dealing with customers.
Revolution, which sells its makeup and skincare products online and in retailers including Superdrug in the UK and Ulta Beauty in the US, has sought to tap into fast-fashion trends with its rapidly changing product lines backed by marketing on social media.
But its flotation turned out to be a disaster. When it listed two years ago, the company raised £300m and was worth almost £500m and made its founders Adam Minto and Tom Allsworth multimillionaires. Its market value has since plunged as low as £60m.
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An independent investigation that followed its share suspension eventually led to the resignation of Allsworth as executive chair and Minto as chief executive.
The inquiry found in January that the men had made personal loans or other investments worth £1m in total to a distributor without the board’s knowledge and that sales had been overstated by £9m. The investigation also questioned the terms of the acquisition of the haircare and skincare products manufacturer Medichem, which was owned by Allsworth.
Revolution insisted on Wednesday that its board and management team had “worked tirelessly for the last 10 months towards resolving the historical issues” and granted them a chunk of share options as a reward.
Mould said: “For the sake of other shareholders, both parties could do with putting the war of words behind them and working together constructively, whatever concessions this might require on both sides.”
Boohoo has its own problems to contend with. It experienced a boom during the height of the Covid-19 pandemic when shops were closed during lockdowns, but then dived almost £91m into the red last month. Annual sales fell and it wrestled with higher levels of clothes returns, and a return of shoppers to the high street.
