A beleaguered brisk fashion retailer Boohoo Group (LSE:DEBS) – currently trading as Debenhams – has a dismal history of reporting dismal financial results. However, its first half results published yesterday (November 27) were met with an enthusiastic market response, with Boohoo’s share price rising from 12p to 22.50p as I write.

There are good reasons for optimism. Aggressive cost-cutting measures are starting to bear fruit. What’s more, OBJECTIVETransitioning a listed company to a market model covering all departments seems to be the right strategy.

But will these factors be enough to sustain a sustained share price recovery in the face of acute corporate governance tensions and continued revenue declines? I’m not so sure about that. Here’s why.

The phrase triumphs

Let’s start with the undeniably impressive attractions. Statutory losses after tax were almost eliminated, falling from £126.7m to just £3.4m.

Furthermore, underlying operating profit turned positive at £2 million following a loss of £9 million in the previous period. The balance sheet is also in better shape with a reduction in net debt of £32 million to £111 million. These are significant achievements.

Driving the recovery is CEO Dan Finley’s shift to a market-led model. This modern framework now accounts for 32% of the group’s gross merchandise value – up from 19% a year earlier.

Essentially, the goal is to move the company from a time-honored online retail structure, where the company maintains and sells its own inventory, to a platform that connects third-party sellers with customers, e.g. Amazon does. Management firmly describes this as “stock-lite, capital-lite, high margin and high cash generating“.

Economic growth is gaining momentum as the number of market partners doubles to 20,000 per year. What is promising is that all five of the group’s brands – Boo, buuuMAN, PrettyLittleThing, Karen MillenAND Debenhams — are now available on the market thanks to proprietary technology.

Flies in the ointment

Despite encouraging progress, I believe Boohoo’s share price may ultimately come under further pressure. Let’s not forget that we are still talking about a loss-making company here. Worryingly, revenues fell by 23% to £297m. The company has not yet recovered from the crisis.

Moreover, the group is embroiled in a heated dispute with its largest shareholder. Mike Ashley Frasers Group owns nearly 30% of Boohoo shares. In an unconventional move, Boohoo Group bypassed investors by not submitting its modern management incentive plan to a shareholder vote. Chief executive Dan Finley could receive as much as £150m if he manages to raise its valuation to £4.2bn.

This comes after Ashley requested the suspension of founder and executive vice president Mahmoud Kamani from the board just a few months ago. He also opposed Debenhams’ rebranding earlier this year.

As the dispute continues, there is a risk that it will all end in tears for Boohoo if Ashley decides to start a shareholder revolt, disrupt future strategic moves, launch a hostile takeover bid or initiate legal proceedings. These threats should not be taken lightly, as any Newcastle United fan can attest.

The most essential thing

I’m glad Boohoo Group is taking steps in the right direction. The successful implementation of key strategic goals is to be commended. However, the half-year earnings were not flawless and potential investors should be aware of significant corporate governance risks.

There’s a lot more to like about Boohoo shares these days, but currently not enough for me to invest in them.