Boohoo proposes new incentive plan that could hand executives over £100m

Online retailer Boohoo has unveiled an updated share incentive scheme that could net its senior management more than £100million.

Under the proposed structure, which is divided into five ‘tranches,’ payouts will depend on Boohoo’s share price and implied market capitalisation hitting specific targets within the coming five years.

To achieve the first award, the firm’s average shares and traded value must roughly double from their current levels to 95p and £1.2billion, respectively, and stay there over a 90-day time frame, at which point £17.5million will be handed out to staff and executives.

But for employees and directors to receive the maximum cumulative reward of £175million, Boohoo shares need to hit 395p while the company’s market cap has to increase to at least £5billion.

On Thursday, Boohoo Group shares were worth 48.1p, giving the fast fashion seller, whose brands include PrettyLittleThing, Burton and Karen Millen, a total worth of approximately £610million.

Chief executive John Lyttle could take home an extra £50million should those objectives be fully achieved, while recently-appointed finance boss Shaun McCabe would be £25million richer.

Meanwhile, co-founder Carol Kane will have gained £20million, and Samir Kamani, son of Boohoo’s other founder Mahmud Kamani, would be entitled to £12.5million.

Shareholders will be asked to vote on the measure at a general meeting in March, even though the Manchester-based retailer claimed that it is not legally required to seek their approval. 

Iain MacDonald, the group’s chairman, said: ‘In designing the plan, we recognised it needed to go deeper into the business than prior schemes while leaving headroom to attract the world-class talent that is essential to the execution of our strategy and growth ambitions.

‘This is why the plan extends beyond the executive to include additional members of the senior leadership and indeed the wider employee population while acting as a powerful recruitment and incentivisation tool for new joiners.’ 

Boohoo added that the current performance plan formulated in 2020, which requires shares to reach 500p before any incentives are awarded, has ‘little or no value’ given the slump in the company’s valuation.

Boohoo shares peaked at over 400p in mid-2020 when Covid-19 restrictions had driven consumers to buy their clothes online while apparel shops in the UK were temporarily shut.

Soon afterwards, they began to spiral following reports by the Sunday Times and charity Labour Behind the Label that found workers at some garment factories supplying products for the business were being underpaid and subjected to sub-par working conditions.

The group’s shares did gradually bounce back but started tumbling again as sales growth slowed due to loosening lockdown curbs, supply chain pressures delaying deliveries and higher customer return rates.

Activist investors began increasingly shorting the firm’s stock last summer when the Competition and Markets Authority commenced a greenwashing probe into the sustainability claims of Boohoo and rival Asos. 

On top of these problems, clothing demand has fallen across many countries, such as the UK and much of Europe, because of rising inflation and market uncertainty. 

For the four months ending December, Boohoo reported revenue declined by 11 per cent year-on-year to £637.7million, following declining sales across all markets.