(Bloomberg) — Boohoo Group Plc appointed former board member Iain McDonald as its new chairman, prompting broker Shore Capital to cease coverage over corporate governance concerns.
The online clothing retailer, which rebranded as Debenhams Group last year, said Friday that McDonald, whose board tenure from 2017 to February this year included significant corporate upheaval, had taken over from Tim Morris with immediate effect in a move aimed at “rebuilding equity value.”
The shares dropped 2.2% at the close in London. They have slumped more than 90% since their peak in 2020 during the pandemic, a period that includes buying the Debenhams department store chain and turning it into an online marketplace for thousands of brands across fashion, home and beauty.
“They need new blood that’s importantly not associated with the quite significant issues of the past,” Shore Capital analyst Clive Black said in an interview, adding that the company needed an external hire to steer its turnaround efforts. “This appointment is the antithesis of that.”
It’s the first time the broker has dropped coverage over concerns about management, Black said, citing McDonald’s association with recent scandals that engulfed the company. A spokesperson for Debenhams declined to comment.
In 2020, an independent review found management had failed to address severe labor violations in its Leicester factory. Four years later, shareholders revolted over plans to pay executives large bonuses after the share price had collapsed.
Billionaire Mike Ashley’s Frasers Group Plc, a major shareholder, published open letters in late 2024 accusing McDonald and other non-executive directors of overseeing severe governance failures.
Ashley, who also competes with Debenhams via his Sports Direct and House of Fraser retailers, has long pushed for more board representation. Frasers voted against the name change to Debenhams Group and while the rebrand did go ahead, it meant the holding company remained as Boohoo Group.
Debenhams has been cutting costs and shedding assets under Chief Executive Officer Dan Finley since his appointment in 2022.
“We are genuinely excited with what Dan Finley has been doing there in terms of operational improvement,” Black said, adding that dropping coverage is only about the new chairman. “I don’t think this is good for the reputation of the business, and therefore it’s not a story we want to be associated with.”
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