Massive Executive Payouts Amid Retail Struggles
The parent company of Debenhams and Boohoo has unveiled a controversial executive reward scheme that could see its chief executive collect nearly £150 million in shares if he successfully turns around the struggling fashion group. The announcement comes as the company revealed sales had plummeted by 23% in the first half of the year.
Dan Finley, who became group chief executive in 2024, stands to receive £148.1 million in stock under the new incentive plan for top bosses, which is valued at more than £200 million in total. The scheme was revealed alongside disappointing financial results that showed the scale of the challenge facing the retail group.
Financial Performance and Strategic Challenges
Debenhams Group reported sales of just £297 million for the six months ending 31 August, representing a dramatic 23% decline compared to previous periods. The company's youth-focused brands, including Boohoo and Pretty Little Thing, were particularly hard hit, suffering a 41% collapse in sales.
The Karen Millen brand also experienced significant difficulties, with sales falling by 31%. However, there was some positive news from the Debenhams division itself, which now operates as an online marketplace and includes brands such as Oasis and Warehouse. This segment recorded a 20% increase in sales, suggesting the company's strategic shift shows some promise.
Despite the sales decline, the group managed to narrow its pre-tax losses substantially, from £130 million in the previous year to just £2.5 million. This improvement was largely achieved through aggressive cost-cutting measures that saved £160 million. Further savings of £60 million are expected as the company exits a warehouse in Daventry and the US, while putting another facility in Burnley up for sale.
Controversial Reward Scheme Details
The new management incentive scheme replaces an existing reward programme that had caused friction between Boohoo's founders and shareholders over bonus payments. Under the terms of the new arrangement, executives will receive substantial payouts only if they achieve ambitious share price targets.
To trigger the maximum payouts, the company's share price must reach £3 on average over a 30-day period within three years. This would value Debenhams Group at approximately £4.2 billion - 25 times its current market value when trading began on Thursday.
The full potential payout of £222.2 million, to be shared among several executives, requires the share price to maintain this £3 level for an additional two years. Alongside Finley's potential £148 million windfall, finance director Phil Ellis could receive up to £14.8 million, with the remainder distributed among other management team members.
Even if the company only partially achieves its targets, executives could still share £21 million if the share price reaches a minimum threshold of 60p. Notably, the fashion group's billionaire founder Mahmud Kamani will not participate in the scheme.
Shareholder Concerns and Corporate Governance Issues
The company has decided not to seek shareholder approval for the new reward plan, citing concerns that Frasers Group - controlled by Sports Direct founder Mike Ashley and holding almost 30% of shares - would intervene to block it. This decision has raised eyebrows among corporate governance experts and investors.
Debenhams Group explicitly referenced these concerns in its statement, noting that a major competitor who is a significant shareholder continues to seek to disrupt the company's growth strategy rather than supporting its future success. This appears to reference Frasers Group's previous opposition to the company's rebranding from Boohoo Group to Debenhams earlier this year.
Aarin Chiekrie, an equity analyst at Hargreaves Lansdown, expressed scepticism about the arrangement: Boohoo is the right term to describe how its investors must be feeling now, with its shares down about 96% over the last five years. Despite this, and in typical poor corporate governance fashion for Boohoo, it has sidestepped its investors by announcing a new compensation scheme for the management team, without seeking shareholder approval.
The latest reward scheme follows previous controversies over executive payouts at Boohoo. Last year, the group reversed plans to pay three top executives £1 million each in bonuses after reporting widening losses and falling into debt. In 2023, shareholders narrowly approved a growth share plan that could have seen then-chief executive John Lyttle receive up to £50 million in shares.
The company continues to battle challenging market conditions, having experienced a boom during Covid-19 pandemic lockdowns when high street shops were closed, followed by a significant slump in recent years amid intense competition from fast-fashion retailers such as Shein and Temu. As part of its strategic review, the group has put its Pretty Little Thing brand up for sale.
