The new growth share plan, announced by Boohoo in a stock exchange filing this morning (16 February) aims to align the interests of its management and wider team with the fashion group’s broader shareholder base.
Under the plan, a total of GBP175m (US$211m) would be handed out over a period of time if Boohoo’s market capitalisation reaches a minimum of GBP5bn.
The company said it had to rethink its current growth plan following a “unique and unprecedented set of macro-economic and market headwinds experienced over the last three years”, during which time Boohoo’s market capitalisation has “significantly decreased”.
Boohoo said there is “little or no value” in the existing Growth Share Plan – which was introduced for the CEO in 2010 – or the current Management Incentive Plan, introduced in 2020. “They no longer operate as an effective incentive mechanism for this critical population who are responsible for driving business performance and delivering Boohoo’s strategic objectives,” it added.
The new plan has been the subject of an extensive shareholder consultation process. Boohoo says it is designed to “focus solely on creating shareholder value through a series of distinct, stretching share price hurdles”.
“Value will be received under vested awards on a subsequent anniversary of each share price hurdle being achieved, subject to an individual participant’s continued employment over this subsequent period,” it added.
Under the plan, group chief executive John Lyttle could net a maximum bonus of GBP50m, chief financial officer Shaun McCabe could net GBP25m, and co-founder Carol Kane GBP20m. Samir Kamani, the CEO of Boohoo and BoohooMAN, could receive GBP12.5m.
Iain McDonald, chairman of the Remuneration Committee, said: “The Boohoo Group has an outstanding executive team whose ongoing retention is crucial, particularly in an era where the recruitment of such quality is more competitive than ever before. This plan facilitates retention and resolutely aligns our executives’ interests with those of shareholders. 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.”
Last month, Boohoo saw its share price drop nearly 5% after the UK fast fashion retailer lowered its guidance and reported a drop in sales.
Group revenue was down 11% for the year ended 28 February. UK sales were also down 11% year-on-year versus a strong prior year comparative. International sales declined 10%, with extended delivery times compared to pre-pandemic levels affecting the retailer’s proposition.
Boohoo’s share price was up 4.26% this morning to 48.64 pence.