Boohoo - BOO - general discussion
Reports today that Kamani has been ordered to give evidence in U.S. fraud case.
https://www.bloomberg.com/news...
and Sky News article:
How workers in Leicester's textile industry are still being exploited
https://news.sky.com/story/how...
Seems to have caused the market to have another melt down. Perhaps not unreasonably and it is becoming hard to separate out the reality from the noise.
Boohoo (LON:BOO) was my largest holding but as dropped to my fourth largest and is 10.3% of my portfolio. My average price is 276.43.
It is hard to keep the faith when there seems to be a non-stop flow of bad news. It is over 12 months since the board implemented the review and ~11 months since it was published and yet the market is pricing the company as ex growth, even a basket case.
I still believe that my medium price expectation of £6+ is not unreasonable but living through this is not easy.
Regards
Michael
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821 comments
I started this thread a while back because I was a bit of a fanboy of Boohoo (LON:BOO) and thought it right to post here that I have sold out of Boohoo. Maybe this is me picking a bottom, but I have capitulated and after a seven year history in Boohoo (LON:BOO) I have sold out. I could write an essay on why I am crystallising such a large loss but to copy and paste from my tweet:
I cannot see what will change the sentiment in the stock and I think further declines from here are possible, even likely. Would I buy back in at a lower price, not likely. I am trying to pivot away from small caps.
- Would I buy now? - No
- Is the balance sheet strong? - No
- Is there the risk of a fund raise? - Yes (see what happened to $TWD.L down 94% in a month)
- Do I actually like the company anymore? - No
- Is mentally causing me anxiety? - Yes
- As someone (Buffett) said “You don’t have to make back how you lost it”.
- Would I rather be in another stock? - Yes which one TBD.
- Could Boohoo be a ZERO? - Yes possibly.
Regards
Michael
i also sold out earlier this year Michael, losing about £15k on it. TBH whereas I used to stress daily about the fluctuations, now I have moved on I never consider the loss
I feel your anguish with this one
Boohoo is closing it's Wellingborough distribution centre which it opened last year.
https://www.northantstelegraph...
A long article has been published by The times titled
Inside the Boohoo warehouse where workers call themselves slaves
Full text at https://archive.ph/6Ekty and https://archive.ph/H3E4T
Video footage:
An interesting news item which might have effect on competition from Shein. https://www.nbcnews.com/news/w...
illiswilgig thank you for your considered response on Boohoo (LON:BOO) which I still hold.
For my sins I subscribe to Share Prophets and on 30th August they put out a very damning piece from Matt Earl, known as the dark destroyer, about £BOO.
2 years ago Boohoo (LON:BOO) raised £200m and at the time had £440.7m in cash. It has all gone with £161.9m going on Pretty Little Things owned by a Family Member of the Kamani Family.
The current £325m Revolving Credit Facility is being "eaten into big time" which does not sound good.
A number of the corporate shareholders are highly respected but I am very nervous about remaining invested as I have a horrible feeling that this is a "story stock" heading for ZERO.
portugall. Hi. You have put me on the spot. As it happens its something that I have been pondering over.
Mind you - had to re-read what I wrote in May. Luckily it seems to have been vague enough to pass.
Am I tempted? Yes.
Have I bought? No
Why? I wish that was a simple question to answer. And I really want to avoid another overlong post if I can.
I'm tempted because I think there is long term value in this business. In May I wrote that ' it's one I'd like to buy at a value price with the prospect of growth on top,' I note from the stock report that its now trading at around 12x the -recently reduced - broker forecasts for Feb24. 18 months away.
That does tempt me - but its not without risk. Lots of it. I also wrote 'I don't think H1 will be inspiring at all - so I'll be looking for any signs that BOO's turnaround efforts are working - before investing'
My views have not changed. Except that
[1] I am beset with lots of opportunities all potentially great multi-baggers and as rewarding as BOO might be, Though experience leads me to believe that few will achieve this.
[2] I am almost fully invested at the moment - and as I live off the proceeds of my investments - for me to sell something to buy BOO at the moment, it would have to have significantly better upeide with no more risk, thats quite a challenge right now.
And [3] I think the current price is partly the bear market and partly the result of the recent shorting attack. I am very wary of buying shares subject to shorting attacks in a bear market - but there is just the possibility that they do overshoot to the down side. If I see the right opportunity I might just hit the button to buy.
Only a few weeks to go until the H1 results, so I shall continue watching with interest.
cheersMark
illiswilgig now it is down to 44p are you still tempted and if so why?
Your post 10 May 2022.
Are Boohoo (LON:BOO) going to announce a shares buy back? I hold and it looks like it was on the list of items to vote for at the AGM. I assume this will be good news for the shareholders?
They have no cash.
Buying that central office doesn’t look like the best capital allocation decision of the century but what do I know.
Most AGM's have a standard proposal/point allowing the Directors the flexibility to buy/allot shares without calling an EGM. I think this was probably the purpose of the AGM proposal, but TBH I haven't checked.
I can see why they called it Boohoo
Quite a long article about Shein on Wired.
https://www.wired.com/story/fa...
As you say a long article, but very readable. My key takeaway on this was:
[Shein] recently earned a score of zero out of 150 points on a rubric maintained by Remake, a nonprofit advocating for better labor and environmental practices. The score partly reflects Shein’s environmental record: The company sells an enormous volume of disposable clothing, and it discloses so little about its production that it’s impossible to even begin to gauge its environmental footprint. “We still don’t have any real insight into their supply chain. We don’t know how much product they make, we don’t know how much material they’re using in aggregate, we don’t know their carbon emissions,”
Mojo - Well done on calling this one. Is is possible that the last BOO Bull has left the building?
Shame as your post deserves a detailed response. I'm certainly not the right one to give you a detailed response - but I'm game to start the process as I'm seeing BOO as contrarian (in sentiment) and soon potentially becoming contrarian in value - I see the stockreport page now agrees - and starting to look afresh with these results. Always spurred on by the last Bulls leaving the field. I'm not buying yet, got a few more stones to turn over and like you I think this might have further to drift downwards.
It's been common talk for some time that BOO has gone ex-growth. Maybe. It's an easy phrase to throw around but picking over evidence of the past needs careful interpretation to divine the future?
After several years of stellar sales growth - the stockreport shows CAGR of 46.4% from 2017 through to 2022 - the 2022 sales growth is a disappointing 14% after a rather more impressive 41% in 2021. albeit probably boosted by lockdown switch to online. Actually 2022 looks worse when looking at H1 sales growth of 20% yoy and H2 8% yoy.
I guess that's the basic case for the prosecution. And it does make sense - in that 46% sales growth yoy is hard to keep producing magically yoy particularly in current conditions without some form of clear competitive advantage.
It's also well above BOO's own guidance for future CAGR of 25%. Which would look reasonable value against the price of 16x historic adj eps - except that managements own guidance seems to agree with market expectations of only 7% sales growth for FY23 (Current year) and 16% for FY24. Not obviously good value at current prices?
The case for the defence? Not so easy? Which maybe why you've not had any takers so far? With management expectations not looking good value for the next 2 years its either a very long term view or a hope that management is being cautious and upgrades will arrive. Given the outlook for the economy and general state of the world that does look like a triumph of hope over expectation from today?
But before I leave the building - you observe - I haven’t looked closely at recent accounts but writedowns are strong objective hint - can I ask what writedowns you are referring to and why you think that they are evidence of your brick wall for growth?
I can see a bunch of exceptional costs - and a quick look at the H1 results shows that most of them were declared in H1 - relating to administrative and operational acquisition costs. We can quibble over whether these should actually be declared as exceptional - except that I don't see very much that will actually be recurring? I can see increasing costs as a part of the landscape from here on and that has some implication for margins Maybe I am missing something obvious but I don't follow your point on these costs as evidence for sales growth hitting a brick wall?
It's also clear that the brick wall - if it is a brickwall - does not have the usual characteristics of a brickwall. That is to stop everything dead? Looking at the FY results UK sales growth was 27% for the FY. So it seems to be an international brickwall? Perhaps one around the borders of the UK to estabiish an online retailing Dodo sanctuary? Maybe. I can see that happening if BOO's response is to become a UK retailer and give up on international growth?
But is that the plan? And to be fair. It's not really a big surprise that BOO's US distribution has hit a brick wall. You might even say that under the circumstances - lack of air freight capacity doubling BOO's delivery times - it is surpising it took so long to fall from the sky? It might even be a fair criticism that management took too long to bring on the first US DC - though again to be fair that is talking with the benefit of hindsight - not just of the pandemic, but also that the initial online advantage would be reversed in the following year. US revenue growth in from 2020-2022 was 71% but only 4% in 2022. Looking at the halves it was 24% in H1 and -9% (yoy) in H2. I can see the brick wall here. But we are looking at the last of 4 quarters which overall have delivered massive growth. Is it fair to say - it's over - based upon this?
I know I was leaving the building - but as usual I've got wound in to this, its just too fascinating. It seems that the prosecution case is built upon the H2 result in the US - caused by lack of air freight capacity. Or have I misunderstood? Europe and the ROW was already negative but are much smaller than UK and US (there is a lot to drill down on here as well - but I've not done the work yet). The UK has done well and so did the US in H1 so H2 in the US is the big change? Seems unlikely that BOO suddenly became unfashionable in H2 just in the US, so lack of air-freight and an advantage in delivery time suddenly becoming a disadvantage is to blame? If I was the defence I might consider that +4% isn't bad yoy under the circumstances. It's one thing knowing what is wrong. It's another thing entirely to fix it - I suspect it can't be fixed instantly, once delivery times and costs become competitive again it will take time to rebuild. But I don't see why BOO can't do that?
So what are BOO doing about it? I've just been watching parts of the management Q&A and I understand that they are taking possession of a 1msqft DC in Pennsylvannia this month. They are prioritising getting returns and then seasonal items up by the peak season. Fully operational in 2023 (FY2024). Lots of Q&A on tax implications of freight via DC, delivery times and local sourcing long term plans for test and repeat. But it seems like the only plan available under the circumstances. Then the rebuilding starts. I have a lot more to understand about how BOO operates its local manufacturing and test and repeat model - and what they might choose to do in the US - should I ever get the time and inclination. I suspect from the Q&A that they have been diverted from a longterm plan to replicate their UK model in the US - by the urgent need to get a DC up and part functioning this year.
One more snippet on sales growth I took from the Q&A - Carol Kane gave the yoy revenue growth at Karen Millen as 70% in 2021 (FY2022).
Not that Karen Millen is going to make a dent in BOO, PLT and Nasty Gal - but it is a very high margin business in comparison. Intriguing for their ability to deliver on the rest of acquisitions? I remember the same accusations being levelled at them buying Nasty Gal out of liquidation - 'What are they doing wasting time with a bust US brand nobody will ever buy again - if their own brands are so good - they should just invest in them'. Now Karen Millen? Next? well I that was an unfortunately turn of phrase - I mean't what happens for the other brands?
BOO management are guiding that their scaling up of acquired brands in 2021 based upon marketing spend will impact in H2 2022 (FY2023). The has been general scepticism that the tired brands they bought in 2020 will be much benefit? Unyet there is evidence that have done this with Nasty Gal and now that they are doing the same with Karen Millen? Is the sceptisicm justified? What this means for the future I don't know. I don't really know how to compare the prospects for a multi-brand operation crossing so many demographics and products with the usual single brand juggernauts that are invoked?
Ooops. Sorry I rambled on. I really must leave the building now - go to go to the dentist! Hasn't changed my overall view that BOO is likely to go down further before it starts a long recovery. We're all bears this week? I'm certainly looking at taking up howling at the moon! I don't think H1 will be inspiring at all - so I'll be looking for any signs that BOO's turnaround efforts are working - before investing ( disclosre - that would be invest again - as I have a small holding largely acquired at 26p that I failed to finish selling down before the price collapse gathered pace ).
I do regard 52p as an auspicious price and should it fall to there I'd be sorely tempted to add - though I'd be the first to admit that I'm out of my comfort zone in the fashion world - but it's one I'd like to buy at a value price with the prospect of growth on top,
cheers
Mark
Wow Mark...that is a riposte!
I checked the accounts. No write downs. I think I was repeating a comment observed on twitter or some other place...and my guess recall is that it was projecting write down potential linked to warehouse and automation investment and/or Debs acquisition (I think former).
On pedantic level...I didn't say brick wall...just a wall...and I have genuinely run through a non brick wall in the past. It wasn't pleasant but I did go through ;) The wall did provide quite a strong impediment to my smooth progress.
This is the piece I wrote Jan 2021 that I referred to and in it I detail what I'm getting at in the running into a wall sense - https://www.stockopedia.com/co...
Let's say its dark and its hard to see the wall in front of us, if there even is one. My note from Jan 2021 is looking for clues that there is an impediment to growth based on observation of decisions taken by boo. IMO they don't make sense if the boo brand and model is working well. And if it can fade in RoW, Europe and now US...why not UK? Its hinting at brand durability problem...so yes they can make new brands and grow them but that means old boo ain't a growth company?!...high growth multiples come from the ongoing profitable expansion of the core (and yes adding new...but building on core). I note that Karen Millen is a brand quite removed from boo's heritage. Its pricier and more aspirational (kind of professional 20s and 30s women?).
I'm sceptical that air freight and some extended delivery times can explain the dramatic H-on-H decline in US in any comfortable way without needing to get into concerns about brand power and durability in US -> 70% to 0% during a period where consumer conditions remained decent to good is very large...and if an argument is made that there is a cost of living pinch impacting results then boo value should be more attractive too if linear thinking applied?...but I question whether it will work for boo like that and here I'll segue more to UK...I'll hypothesise that boo are a good time excess spending power thing and that if money is truly tight mum won't be funding repeat trivial throwaway boo purchases.
Back to US. If delivery time and process is the problem only then its been so acute short run that the group likely needs to invest heavily to make the US a version of UK in term of boo all round capability? That's a high additional cost.
Anyway, thanks for your response. That's enough from me. I'm still not getting what boo is going forward...I feel its trying to make quite a big transition and retrenching to UK to do it...so maybe building and changing brand perception (Deb, KM, etc). That's not wrong...but its a different dynamic and situation.
Boohoo (LON:BOO) may ‘multi-bag’ from here. I wrote a piece about 15-18 mths ago in here saying clues that growth model challenged (and I think this was before the Shein impact was so visible). My view was partly based on mgt making odd strategic decisions imo that did not align with maximising their hereto spectacular revenue growth trajectory eg Debs and decision to narrow their focus into a really tough area (Next (LON:NXT) !) rather than pressing existing brands outside U.K. and a bigger less crowded battle (global is competitive but they are tiny in bigger pitch…if you’ve got operational knowhow and advantage then can pick off growth more easy for less capital intensity and higher margin).
So, the evidence is that the boo growth model has run into a wall (I haven’t looked closely at recent accounts but writedowns are strong objective hint). I’ve only skimmed comments in here briefly but I don’t believe any of the bulls are addressing this tough inflection issue…instead they are extrapolating past success and interruption as mere scratch rather than dangerous wound.
I’m surprised at the price boo has gotten down to (bear market adds woe obvs)…but I’d now take under this current price as likely trajectory and probably by a decent percentage amount. There’s a real risk that this is a private takeout at low price.
…and their cheapness in recessionary environment probably won’t work. Their cheapness is bullish frivolity in that people buy lots of cheap stuff (from them and others) as times feel good. I’d expect less buying and a little bit more up quality spectrum in tougher time. This is further challenge to boo. Tbh I can see a dodo case for the company. Not a forecast but something to place on the possible spectrum.
I’d welcome someone making a detailed counter case
No detailed counter case from me! I scarpered when my pre teenage daughter and her friends suddenly went all in on Shein. On Sunday, I asked if she still buying from Shein. "Absolutely not! Doesn't like the brand and they steal other peoples designs". Green shoots of recovery I thought and bought back in yesterday. I also think, they now have quite a strong portfolio of brands to play with once that huge investment in infrastructure starts to crystallise. Still some challenging times ahead but appears good value on a potential 2023 recovery.
Good luck 2shedsam
2ShedSam
I would check that they (your teenage daughter and friends) are not all buying second hand from Vinted and shunning new clothes all together.
Tongue firmly in cheek.
Michael, my wife volunteers in a posh seaside town charity shop. All the youngsters now come in hunting “good label” 2nd hand gear and say they are proud to do their but for the planet in doing so
all second hand gear was once first hand gear
For me, I think Boohoo took on a huge task of buying Debenhams and Dorothy Perkins, Wallis and Burton. In the past Boohoo bought one label at a time like Nasty Gal which took them 2 years to make profitable.
This time around they've taken on too much, lesson learnt for them no doubt. On top of this there's been all the problems associated with the pandemic.
Will Boohoo manage to make Debenhams profitable? For me, it's going to take a long time and loads of money to do this. If they manage to do it, then hopefully Debenhams will become a global marketplace and not just UK.
According to https://www.stockopedia.com/sh... yesterday * Boohoo BOOH.L : Barclays cuts target price to 65p from 85p. (I hold)
The volume traded today by 08.30 seems surprisingly high.
For what it's worth, the latest Zeus research note has a DCF valuation of 150p based on a future 10% revenue growth rate.
I appreciate a lot of us (myself included) are heavily down on this share. But does no one see multibagger potential here? The way I see it its a bit late to be selling, we are entering into a pandemic and BOO have made some major aquisitions and investments which may see them through and into the future. There were over £70 million one off costs associated with aquisitions ect so these arent going to appear next year. Investment in the UK this year has created an infrastructure capable of seeing £4Billion sales. Plus investment going live within 12 months in the US will see delivery times come back down to 3 days and capability to take BOO to 5 Billion in sales.
Growth hasn't stopped. It has slowed. Partly driven by the lock down bonanza which was always going to be hard to beat. Secondly we have then had logistics challenges. Again short term. Next we have energy and cost of living crisis. Again short term. Growth will return and it will be the companies who have made infrastructure investments that reduce their costs and shorten lead times that will be best placed to capitalise as we come out of recession.
Amazing to see someone looking ahead and it's not all doom and gloom.
I think most people are so used to getting positive results from the great bull market that they're not mentally prepared for any bear market and yet, this is where the greatest money to be made is. When I started a business, I didn't expect it to start making money straight away - I thought it would take about 2 years before it became profitable and a few more after that before I would actually make any money. Most businesses are like this and have down turns. As long as the down turns are not the fault of management - and I don't think that is the case here, although many choose to blame them even though a quick look around shows that we are all going through this - then I will continue and if the opportunity arises for me to increase my share at very attractive prices, then I will do so. It could be another 2 to 5 years before it gets back to what it was and then all the investments made within the business begin to show fruit. That's what I'm prepared for and will continue to study the reports and figures returned from the business to see how they execute.
Happy to be against the crowd here.
Not so sure about some of that. I would have thought that coming out of lockdowns means that people are going out more, going on holiday more and so on and this would increase demand for clothing mitigating a decline in the spurt that internet shopping received during the pandemic.
But for me the key issue is this. In a high inflation environment can the company pass on those costs? Some make a case that consumers will trade down from more expensive brands, however, I think that most of Boohoo (LON:BOO) sales are in a highly price sensitive part of the market and so have very little pricing power. Therefore, profits dry up until something happens to change that. No position.
The lockdowns were a strange time. People were on full pay sat at home with nothing to do but buy clothes that they couldnt use.
Coming out of lockdowns there is pent up demand to get away but i feel there is less cash around and perhaps less employment in some sectors too. Various reasons for that, take your pick- Brexit, Pandemic, Russia. But this is a global issue, not isolated to BOO alone. ASOS/BOO/JOULES/BURBERRY/JD SPORTS/NEXT They are all down. In my view, this is not about competition. All of these brands have actually increased their revenue over the last year, yet all of them are experiencing major drops in share price based on the environment we find ourselves in. This isn't because of Shein, plenty of room for all of them.
Back to BOO. Why invest? Well what should management have done? Not spend the cash and watch its value wither away with inflation? Or get it spent and invest it creating the infrastructure for growth over the next 5 years. Had they not spent the cash then we would have hit a ceiling in the warehouse and we then we would be seeing higher lead times and lost customers. Did we need a London office? I don't know. But that is now a solid appreciating asset (bought at possibly the best time in the last 100 years to buy office space ) and its not a bad place to store cash in an inflationary environment.
I can understand why the decisions that have been made were made. I don't like how it makes the P & L look, but this is about investing for the future, overcoming short term challenges and ensuring growth is possible so that it can reach 5 billion sales.
"ASOS/BOO/JOULES/BURBERRY/JD SPORTS/NEXT They are all down"
Yes all down but Boohoo (LON:BOO) is down 77%, Burberry (LON:BRBY) down 32%, Jd Sports Fashion (LON:JD.) down 45% and Next (LON:NXT) down 27%, so they are not all down as much as £BOO
If Boohoo (LON:BOO) is so good why are not the directors buying at these low prices?
"This isn't because of Shein, plenty of room for all of them"
Maybe but Shein is growing far faster than Boohoo (LON:BOO), so it must be eating someones pie, especially in the US market. "Shein has achieved a valuation of $100 billion", whilst BOO is around $1.23 billion. Shein and BOO had similar valuations in 2019 around $5bn. I think Shein valuation at $100bn is probably too high but you can see the way things have gone in the last 3 years.
Amazed you failed to mention the competition which has grown readily in the last 5 years.
2 directors sold 50 million shares @ 285p and have not been buying them back at these low prices. We should have followed their lead.
I have always looked at this share and others like Superdry and their armies of avid fans with amusement. Nothing goes out of fashion faster than a fast fashion brand. Why a bunch of (ahem) older men think they could possibly have insights into young people's clothes buying habits (while ignoring the allegations of abusive practices) truly escapes me.
I mean purely on business terms why should this business ever recover from here? What makes you think that young people will pay for their clothes (in growing numbers) in future?
You're not buying a brand. You're buying the company that can set up as many brands as it wants. It's the back end that's important, the logistics and IT infrastructure. They hire good people and generally deploy capital well.
The people running this business have been successful rag traders for donkeys years.
Yes the shares haven't done well recently but any good investment book will tell you that good companies have bad spells - will it recover? Who knows and that's what makes a market. Basically investors here have two choices at these prices, sell or buy more.
At 75p this stock is still OVERVALUED. Do yourself a favour and sell this dog now. It’s clearly not a growth stock any more. The management have demonstrated their complete inability to run any company, let alone one in the extremely competitive fashion sector.
I expect this company will go bust but if it does survive it will NEVER support a premium share price rating as management have zero credibility now. It’s currently trading at about 15 times this years earnings estimate, Next is trading at 11x. Which would you rather own?
Short burning? Lol
In response to some of the comments below where people seem to be conflating the usefulness of a Stockopedia subscription with the dire performance of Boohoo (LON:BOO), I would counter that Stockopedia has been calling this one correctly all along.
To illustrate what I mean, Boohoo's StockRank peaked at 83 back in January 2020 when the share price was around 325p and the SR then steadily declined to 43 by June of 2021 when it was firmly in the Falling Star classification, one of Stocko's four "Losing Styles". It had been in this classification for several months at this point and yet it was still possible to exit at 330p per share in June of 2021.
The core feature of Stockopedia is the ranking and rating system and if people pay for the feature but don't use it, then shooting the messenger may be a little churlish. I find it worthwhile to periodically re-visit some of Ed's videos under the LEARN tab on the left as a reminder of the power of the ranks and ratings in helping to avoid disasters.
The market is harsh at the moment and I continue to make many costly mistakes but I do periodically review my holdings and try to rebalance things into the four winning styles in order to stay out of serious trouble. It's really difficult to fight our innate biases (I still currently hold both Games Workshop (LON:GAW) and Bioventix (LON:BVXP) against my own advice - these are both Falling Stars) but Stockopedia does provide all the tools we need to keep the table tilted in our favour on aggregate. Even Stocko won't save us if we ignore basic risk controls around position sizing or if we choose to overlook available warnings that management may not be aligned with our best interests (I believe that the PLT deal was a clear red flag in that regard).
I know that sometimes in the SVCR both above and below the line, people get enthusiastically carried away with the potential for a particular company and it's human nature to get caught up in the excitement too but there's plenty of counter narrative to be found and the fundamental tools of Stockopedia provide a great sense check.
Ultimately we must all take responsibility for our decisions, whatever research, hype or hope we base them on and so, if Games Workshop (LON:GAW) and Bioventix (LON:BVXP) continue to tumble, I'll only have myself to blame.
Well said JS68.
(Edit: I, like many, went into £BOO in 2021 - I sold a few times and bought back in when it was a lot lower - gave up in the end. But I never blamed Stockopedia for my mistakes. They were MY mistakes and no one else's.
If there was anything wrong with Stocko in 2021 it was a sort of group-think around the "coffee can" idea - totally wrong in hindsight - but as I said I sold and bought and finally stopped so that was not my philosophy - but I suspect many got more badly hurt than me due to it.)
John a good comment but I think that only with the benefit of hindsight did the Stockranks indicate that the first half of 2021 was the time to get out. Indeed the Stockrank has increased over the period of the greatest fall from 200p to 70p.
I just think that the Boohoo chart confirms the point you want to make rather than gives proof that the direction of the Stockranks gives a sell (or buy) signal. Let's face it if it did we would all be millionaires trading on the back of it.
Look at the chart of Ergomed (LON:ERGO) Reach (LON:RCH) Sylvania Platinum (LON:SLP) or Anglo Asian Mining (LON:AAZ)
I am not though conflating the performance of Boohoo (LON:BOO) with the usefullness of Stockopedia. I just don't think that the Stockranks are a cure all on an individual level but might be as I said if you adopt Ed's NAPS type approach.
The main point I was making was that I should either be investing in the S&P or doing fundemental research reading reports and accounts and using Sharepad as a means of looking at data.
Kind regards
Michael
John
Here’s another chart where Stockranks stayed “bullish” all the time price declined from 8000p to about 5800p. If only investing was as simple as using an algo. Next (LON:NXT)
Hi MichaelFBS.
I'm not advocating that the StockRanks alone are foolproof signals - I doubt that even Ed would make that case. All I'm saying is that for 3 months prior to Boohoo (LON:BOO) losing 80% of its value, Stocko classified it correctly as a losing style and therefore a warning to dig deeper and perhaps at least consider trimming position size.
Since you chose Next (LON:NXT) for comparison, some differences between their respective charts and rankings:
1. Next retains a Winning Style ranking (currently Contrarian) based upon many fundamental metrics. One example of the data that feeds into the style classification is the Quality Red Flag Piotroski F-Score which is a maximum 9 for Next versus a very poor 3 for Boohoo. If I held Boohoo (LON:BOO), the F-score alone would give me pause for thought. It's such a simple indicator that it's easy to overlook the power of the data behind it and it's another fundamental tool of Stockopedia which can help investors avoid bear traps.
2. Even at the current share price, Next is over 40% up on its March 2020 low and only 12% off its pre-Covid high so your chart extract actually affirms the usefulness of the Stock Ranks in flagging a quality operator. If I held NEXT, I would be happy to continue holding.
Viewing the two together nicely illustrates the differences I highlight above:
Comparing companies is another great feature of Stocko. If you pull up the overview page of any company, you can use the compare feature to do a side by side comparison of all the fundamental metrics against other similar companies. If you do this exercise with Next (LON:NXT) and Boohoo (LON:BOO), the former absolutely trounces the latter and I would hazard a guess that even before Boohoo (LON:BOO) fell off the cliff, that would have been the case:
https://www.stockopedia.com/co...
My further point was around taking responsibility for our own investment decisions. People claiming that they were "suckered in" to buying Boohoo (LON:BOO) appear be saying that they blindly followed the opinions of others and ignored the many tools that their Stocko subscription paid for. It's not a judgement, because I know how compelling it can be when a great story emerges, but my point is simply that cancelling a Stocko subscription on the back of a disaster like Boohoo (LON:BOO) is chucking the baby out with the bathwater. I would argue that the best way back from such a disaster should be to double down on using the power of Stocko to avoid further car crashes.
This would probably run and run but if you want to pick dates here is a chart from when I first bough Boohoo (LON:BOO) back in November 2015 against £NXT.
With Boohoo up 99% and Next down 18% over the period though Next has paid dividends over the period. Neither though great performances.
I think my mistake with Boohoo (LON:BOO) and others (there have been a number over the past two years) is that I have simply been in the wrong companies (regardless of their ranks and styles) and thought that some how I could achieve unachievable returns by being in those companies.
My 16 year old son's much smaller JISA and SIPP which I manage with different rules is down only 5% YTD and 2.44% on a 12 month basis with 41% in BRK and the rest with the rest in Fundsmith (19%), Buffettology (8%), DIS (5%), BVXP (4%), and the balance pretty evenly spread across Visa, LVMH, JPM, TRMR, TSLA, AAZ, S&P500, NFLX and PYPL.
I picked these companies because I believed they were sound companies that would compound over a long period (not because and that could support the only rule for the portfolio which is I am not allowed to sell. (I broke this once in 9 years with a sale of half of PYPL at the peak last July when the valuation had become absurd).Regards
Michael
Worth remembering that the Stockranks are relative. So, a good Stockrank indicates that these share are more likely to do better than the lower ranked ones, but better can mean going down less rather than going up more.
Well I have run NAPs every month since April 2021 and they have not beaten the Allshare index, in fact June 2021 is down over 19%, April 21 was similar, so it does not seem to be working in this market.
Point I was making is that Stockranks are a relative measure.
The point I was making is since April 2021, the top Stockranks are under performing the market, sometimes by a considerable margin. Previously NAPs have outperformed the All Share index. If the top stockranks underperform then is there is any point in looking at the rankings? Again in 2020 stockranks were turn on their head with the lowest ranked ones outperforming. Top Q and QM are the worst performing stocks this year.
It depends how you define "The Market". The top stockranks over the last year have outperformed the average share but not the All Share Index (which is poorly named).
NAPs is judge against the Allshare index usually.
What do you mean by the top stockranks? Do you mean the performance charts or the Top stockranks which has the top 25.
So larger companies have performed better than average but the best performing rank in the > 2.5 Bn level is the 0-10 rank, over the last year.
The choice of benchmark is always debatable.
I find the Stocko performance charts hard to interpret so I do my own analysis. By "top StockRank" I mean shares with the highest QVM StockRank in my investment universe, which is roughly a SR >70.
From a snapshot I took in mid March 2021, the All Share Index total return is 10.2%, the average of the 250 shares with the highest SR is +0.2% and the average of all shares in my universe -4.5%. Top SRs have underperformed the All Share Index but beaten the average performance over that time. The average of the 250 shares with the lowest SRs is -11.5% so the StockRanks system has made an acceptable job of separating the wheat from the chaff.
Over the last year I believe the StockRanks have worked about as well as anybody could reasonably expect, considering the circumstances.
It is worth bearing in mind that at times of uncertainty, volatility increases, historic correlations break down and the movements of share prices are much more random. A factor based approach is unlikely to be effective under those circumstances and that is what we have been seeing for the last 3 months. Even then, the top SRs have a performance that is close to random rather than showing significant underperformance.
The chart below demonstrates this quite well. It represents rolling 6 week periods of relative performance with the data markers in the centre of the period under consideration. Any data point within the grey bars could be random, particularly when close to 0. Any data point outside the bars probably represents a real effect. it will be interesting to see how this develops with time.
I think it’s a fair point about comparing to the Allshare index, which means that the previous comparisons with the index are operating NAPs and the top performing Stocko stocks? Did you mean March 2022, not 2021?
On NAPs which take roughly the top QM and VM in each sector, certainly the performance has not been good since April 2021 although most of that was due to falls from September onwards. I think 2021 NAPS was up 27% but Aprils after a year was down around 13%, it fell from +9% at end of August 21 to -21% in March 22, before recovering to -13%, the Allshare index was up around 5% over that year.
June NAPs is currently is down 18%, this is just down not against the index. Ed found that picking the top VM/QM stocks was better than the top QVM stocks. NAPs 2022 I think is down around 15% despite having more energy stocks than usual.
The "snapshot" was from March 21 and looks at performance of a portfolio selected by SR at that time over the following 60 weeks.
Performance of the top SRs in March and April 22 has been slightly negative compared to the average, as shown on the 6 week rolling windows on the chart, but I don't think the difference is statistically significant.
The NAPS is just one portfolio from many that could have been selected from the same data, so we can't really draw too firm conclusions from its performance.
There is research that looks at whether separate portfolios should be constructed for different factors ( eg. a Q and a V and an M portfolio) or whether the factors should be combined into the selected shares (eg. a QVM) portfolio. I was under the impression that the combined approach was superior, but I don't think the difference is great and I haven't read much about it recently. Ed's solution of separate QM and VM seems a good compromise .
I select a single portfolio choosing shares that combine Quality, Momentum, Value, Mkt Cap and Volatility but the separate portfolios approach may make the reasons for selecting an individual share more transparent.
I can't believe otherwise well informed investors are still holding out hope with this company, the CEO ripped off shareholders to pay his son (PLT "acquisition ") used dodgy illegal workers in uk sweatshops, accused of fraud in USA and is now having his lunch eaten by Schein. The red red flags were clear as day for a long time but too many here have become become emotionally attached.
CEO - nope.
Used illegal workers- nope
Fraud in USA- nope
Can’t even spell Shein.
Apart from that, spot on.
I am not sure that Paul can bear to look at Boohoo (LON:BOO) reporting details. Know the feeling!
I notice "Equity-settled share-based payment charges" have increased from £11m in 2020 to £26m now. This accounts for a significant chunk of the large difference between Adjusted and Statutory PBT. Why has this charge gone up so much?
There is more detail on this in the 2021 Annual Report. Its a payout to Pretty Little Thing (CEO Umar Kamani) for the purchase of the remaining 34% of the company in 2021. I'm not sure how much remains to be paid out.
It's just that egregious transfer of wealth from shareholders to the Kamani family that made Boohoo (LON:BOO) uninvestable for me.
Interesting that Boohoo (LON:BOO) used to be one of the most discussed shares on Stockopedia and today there are no comments even after they publish their final results.... could this alone be a buy signal?
Clearly, neither the results nor outlook are very thrilling... I am just wondering if recovery is one day inevitable, and that this is one for the patient.
The best time to buy a business is when it is on the operating table. If you think there is a long term future for the business and you are OK with short term volatility - then to me this is a bargain. Most people are traders at heart, so I don't think this will resonate very well with them.
Also, I do not and will never use leverage in my buying so I can comfortably wait many years for sentiment to change. I think this business is setting itself up for the future, although I am a little concerned about the cash flow as I like it to be cash rich and not rely on the whim of bankers. I will study the accounts tonight but on first glance, I'm still happy with my process.
My sentiments too. Paul super busy on SCVR so suspect he will come round to this later.
I've consigned this to the dustbin of my portfolio, if I make breakeven in the long run I'll be happy.
It's a bit galling, as I subscribed to stockopedia to benefit my performance, but got sucked in to all the chat around this share as a 'coffee can' hold forever, GARP share etc... in the end it's been a very expensive mistake, probably my heaviest ever loser, and getting worse with today's news as I continue to hold. This is not to have a pop at anyone, the decision to invest was my own.
It has taught me some important lessons, and I'm grateful for that.
Looking at the results today, there are some positives, but for this to turnaround it's going to rely on flawless execution of an ambitious strategy, and it will likely take years to get anywhere close to previous highs, if it gets there.
Yep - I also got sucked in, and this has also been my biggest paper loss in the last 17 years.
I was in Boohoo (LON:BOO) from 12/11/2015 and sold out in my March 2020 meltdown for 44.2% CAGR for a very good profit. I then re-entered very heavily between June and November at prices that I thought were bargains between 419p and 298p for what is now a 6 figure loss and wipes out the previous gain and some.
I felt I knew the company but it turned as of today that I didn't. Whether there is an element of baby and bath water I don't know. It just seems overdone.
One of Buffett's phrases that I keep reminding myself of is:
"You don't have to make it back the way you lost it... in fact it is probably a mistake to try and make it back the way you lost it.."
Boohoo (LON:BOO) is now my smallest holding of the stocks I have held for any length of time at 3.4% of the portfolio (I am in the process of buying BRK.B and teh S&P) and if I did come across anything that I felt was a strong winner going forward Boohoo would be the first to go. I am tempted to reduce to 2% and deploy the money elsewhere.
On the "subscribed to stockopedia to benefit my performance". All my subscriptions (apart from Sharepad which I use just for the data) are under review. I have already jetisoned the FT and IC but I enjoy the SCVR but suspect I should be reading annual reports. So I suspect my subs to Stocko, GCI, SCSW and JIC may well go.
Stockopedia can add value if and it is a big if, you use the a NAPS type approach but it will be interesting to note whether it works in the years ahead which are almost certainly going to be much more challenging that the years to date since Ed setup Stockopedia.
I recently replied to a tweet question:
"If you could go back and redo how you learned to become an investor, what would you do differently?
"Start in a bear market where I learnt to take drawdowns on small amounts of money rather a bull market where I thought I was a genius and then entered a bear market with large amounts of money. You learn far more in a bear/difficult market."
Regards
Michael
Heavy Boohoo (LON:BOO) share price fall yesterday and again so far today and now back to multi year lows. Bad news leaking perhaps?
Heavy Boo price rise today - good news leaking perhaps?
Hope so, though perhaps more likely a bounce after heavy recent falls. ASOS also had a good day.
Surprised not to see more posts here on BOO including from Paul. Perhaps nearly everyone who held has given up and cut the loss. Wish I had too, but I’ve decided to wait for their next update and hope that it’s at least in line. If it is that could lead to a share price bounce and if there’s a more promising Outlook (dream on!) a significant bounce.
There's nothing to comment on.
Until the results and guidance come out we're all in the dark. The price will do what the price will do in the meantime.
Flights are returning to normal, there's a decent amount of UK based manufacturing so the China woes shouldn't be as bad for Boo. Growth is stalling and a recession likely, but that'll be good for value brands. Been a tough year here, hindsight is 20/20 and I've learnt some lessons about stop losses but I'm hopeful with their continued capex expansion that really they're only just getting started.
of note https://www.bloomberg.com/opin...
Hi
I subscribe to a newsletter from Chartr and in yesterday’s they covered the rise of Shein and its valuation.
Shein reportedly raised $1 billion to value it at $100 billion, so approximately 67 times more “valuable” that £BOO. Shein sales are 5.79x Boohoos. I can’t find any reliable figure for income (for Shein not Boohoo :-)).
You can read in to this what you like: Boohoo is already toast, that Shein will go the same was as Boohoo (see below), Shein will simply accelerate the move to online for all retailers including Boohoo etc etc.
I have no idea but investors do seem to price so many stocks as though there is room for only one and while in many areas of the internet this may be true (there is only one search provider GOOG (I hold), OS provider MSFT (I hold), one second hand sales platform EBAY etc) I am not sure that applies in fashion retail either online or on the high street. Inditex is valued at $68bn, H&M at $24bn, GAP at $5bn, Next (LON:NXT) at $10bn. All to one extent or another profitable, though the GAP’s price chart looks might similar to Boohoo’s!(in fact it is worse with The GAP down 64%, on a PE(f) of 6.9 and a dividend yield of 4.88%!). There is I believe room for more than one online retailer.
The newsletter also raises certain other issues about Shein:
- “Shein stole my design”
- Sustainability: little is known about how the companies goods are produced -
- There we’re reports in December of staff working 75 hour weeks.
- Good On You gave Shein a “very poor” environmental rating.
- After the lessons, hopefully, learned from the conflict with Russia and relying too much on a state such as Putin’s Russia for our oils and gas needs, maybe we should question relying on other rather unsavoury states (IMO) for so much of our goods? I am not anti-globalisation but do think that sourcing so many of our goods from China may not be that smart?
I continue to hold Boohoo (LON:BOO) in part because most (I hope all!) of the damage is done and I think the sell off is irrational.
Regards
Michael
Fast-expanding Chinese fashion e-tailer Shein is looking to raise fresh funds and its reported $1 billion target would give it a market value of close to $100 billion.
Further headwinds for Boohoo with Shein continuing to capture the market share at a break neck speed. Surprisingly no boohoo brands in Top 5 websites for Fashion and Lifestyle in the UK.
Wonder Boohoo can continue to grow.?
https://www.similarweb.com/top...
Err, now do the Boo websites in the aggregate. Why is it surprising there's no single Boo website in the top 5 when they deliberately run a differentiated proposition? Of course, we might expect Debenhams to be there, but given the company failed in its original guise because it failed to embrace digital that's not exactly surprising either.
Not sure why someone else growing faster than Boo is a headwind worth worrying about when there are huge tailwinds - clothing market expected to grow by more than 20% between 2021 and 2026, huge global expansion plans with cash on the balance sheet to fund them. Sure Shein might grow faster, so what - it's not a zero sum game.
"clothing market expected to grow by more than 20% between 2021 and 2026"
That's an annual growth rate of just 3.7% pa, or negative in real terms.
Maybe this is a key reason the Boohoo (LON:BOO) share price has tanked?
More than. And whilst inflation is currently high, most of the forecasts were created before it started running rampant.
In a high inflation world do you think people are more likely to shop around or less likely to?
The Grand Old Duke he marched them up and down, so when (if) get back to 200 we can then decide. Stop losses create volatility but protect your wealth. Sorry for the negative.
I'm into armaments, coal, silver, anything dug out of the ground
Revision but with the weekly chart which finding helpful for entry points on turnarounds.
The MACD turning up but has a long way to go with many sellers on the way up. See you in 2024.
Questor in the Telegraph today decides that Boohoo (LON:BOO) is a hold in his AIM portfolio FWIW. Probably behind their paywall but UK investors can always pop out and buy a copy.
https://www.telegraph.co.uk/in...
OK, Yet another Journo's opinion but he also thinks that supply chain problems will go away and (snip) -
in the short run, the company’s long-term prospects are far more encouraging. For example, it is due to open its first US distribution centre next year.
Alongside the use of greater automation in its existing warehouses, this should help to offset rising costs. It will also improve the firm’s product availability in America should today’s supply chain problems persist.
I hold - and well underwater.
The opening question is "What are your thoughts on this?" Better to say what I did, and what my thoughts are behind what I did. I bought, for me a large investment in what I think is a very good business when the majority are very full of fear as the fundamentals are very good at this price. I hope that you are happy with your research into the fundamentals of this company and make your decision based on those and are not ruled by emotional behaviour or speculative decisions. We may have not yet reached peak fear, if not, I will continue to accumulate, otherwise I will sit on my arse.
Surely "market expectations" were a loss of £500 million?!
Typo - cant delete/correct
RNS out. Trading update on 10 March. Statement on Russia noting that it accounts for only 0.1 % of revenues.
Down below 80p
A take private would be a bad joke
In case you missed it the Mail on Sunday was speculating whether Boohoo (LON:BOO) might be taken private https://www.thisismoney.co.uk/...
just browsing the Apple App Store looking at free apps. In the top 120 apps the following relate to fashion..
VINTED - 17
H&M - 23
SHEIN - 27
ASOS - 92
DEBOP - 100
and finally BOOHOO comes in at 118
Funny, because when I search for fashion and do most popular I get
2- Shein
3- Boohoo
7- PLT
17- Nasty Gal
And a whole load of other boo brands including Debenhams, Karen Millen, Coast, Warehouse and Oasis all in the top 50.
Plus Boohoo have 166k reviews, PLT 141k reviews versus Shein’s 78k.
Interesting article on clothing returns and how they are managed ( or not managed)
https://restofworld.org/2022/s...
just keeps going absolutely relentless drop mind boggling 80% down from its highs
Rambling Telegraph article on last week's bid scare
https://12ft.io/proxy?q=https%...
I’m not a fan of Boohoo and felt tempted to make it my first ever short last year but I think the Telegraph article has been sponsored by Hedge funds needing to cover their profitable short positions by nudging despairing private investors into selling. I expect a bit of a bounce in the coming weeks before the SP drifts sideways or lower.
This deserves a book by someone who understands it. Good god.
Boohoo (LON:BOO) How low can it go? Well, knowns the answer to this. It appears a good value business based on today's price, assuming no further deterioration in business KPI's. Personally, I think there are still a few profit warnings in the pipeline, and set my new consider a position price at NAV (35p for FY2022). see below the graph.
As always DYOR.
BSV
£BOO
Well, I think we are seeing this unravel with a business model which can't be defended and no barriers to entry without underhand practices. It was only competitive when underpaying labour through third-party arrangements. The new price target is 26p (this is my new NAV calculation.)
I would still be a seller at these prices, and still expect further profit warnings as the consumer goes into hibernation this winter as energy and food bills sore to new heights.
As always DYOR
BSV
It's the 16.45 item on here https://www-boerse--online-de.translate.goog/nachrichten/aktien/wichtige-kursbewegungen-rekord-kurssturz-bei-spiele-plattform-roblox-1031192115?_x_tr_sl=de&_x_tr_tl=en&_x_tr_hl=en&_x_tr_pto=sc
Boohoo (LON:BOO) shares are up 3% on takeover rumours.
I heard that too. Boohoo to buy another company or someone to buy boo? I ain’t searching twitter for the rumour news though.
I only saw it on here: https://www.stockopedia.com/sh...
Shares are 102p now.
Boohoo ad banned by regulator for objectifying women
Not helpful.
I am sorry to see below that Anon16 decided to take his biggest loss today.
These feel like dark times right now in small caps generally, and very tough especially in on-line fashion retail stocks like Boohoo, Joules etc.
There has not been an update recently from Boohoo, and I believe that some investors are reading this as another profit warning around the corner, and it is always at these times that some of us just can't put up with it anymore and start to capitulate.
But if we are not using gearing, and we put our emotions to one side and be patient, I believe in two or three years time we may be able to get out evens.
If we take a 50% loss it will take a 100% gain to get back to even
I believe in two or three years time we may be able to get out evens.
It would appear that you are suffering from "get-even-itis" . Get-even-itis is the determination to hold onto a bad investment until you get even. This is a leading cause of terminally poor portfolio performance.
If we take a 50% loss it will take a 100% gain to get back to even
You already have a 50% loss regardless of whether you book it or not.
Hi Epsilon
Thank you for that bucket of cold water !
Has anyone got any data / genuine insight how Debenhams is doing? Or the more upmarket brands bought cheap to have their residual cachet exploited.
If Boohoo (LON:BOO) can hold on and do well in its fully-invested, home market then issues elsewhere matter less and /or can be fixed with cash generated in the UK eg a warehouse(s) for the US.
I hold and expect some recovery in 6-12 months. The level of that depends on the performance of the UK first.
Great question and one I'm looking forward to being answered in the results. Not sure if it tells us about sales, but the website is chockablock with non Boo owned brands so platform fee revenue will be interesting if they break it out.
dunno, but I can say the deb sale has fourty eight thousand five hundred and thirty six ! 48,536 line items reduced in the sale. sort by cheapest first and BOO items are selling for a quid, ONE POUND £1
the days of cheap tat must be closing fast?
https://www.debenhams.com/cate...
Alexa can give you some insight, (https://www.alexa.com/siteinfo...) but I increasingly feel they bought shoddy brands, like DEB and Burton with little to no value intrinsically. A bit vanity in my opinion. I mean, who will think to shop at debenhams, really.
The theory being, buy Burton brand, stitch a Burton label onto a cheap made-in-China hat and try and flog it for £18. realise nobody cares about 'Burton' and reduce it to £3 to clear stock. Great business sense https://www.debenhams.com/prod...
The point I make being mgmt would have made revenue projections based on the ascribed value of these brands and it at least appears to not be paying off. A lot of the knockdown tat is Burton. Again, there is no value in that brand, may as well not have bought it and just created a label called Bruton, Burties or something. It doesn't sell, there is no value in that brand in my view. Debs is a great way to aggregate products and provide another window online but again, I dont think very many peope at all will view Debenhams.com as a primary shopping destination. Could have bought a domain called debsies.com or anything and run their same platform through that. They have overpaid (or unnecesarily paid) and are starting to see that, I believe this will be the conclusion, anyway.
BTW, I hold but dont necessarily agree with some of the decisions mgmt are making of late.
The Alexa.com data is junk. Says that 44% of Debenhams.com visitors are in Japan, 27% in the US and 3.8% India. So we're supposed to believe that UK visitors are less than 3.8% of total site visits.
yes, that Alexa info is quite poor. Similarweb give some free insight here - I dont have an account. I have PDF'd https://drive.google.com/file/... in case you want a copy.
M&S seem to have turned around putting 'concessions' in their large stores rather than trying to invent clothes that nobody wanted, even oldies - sub out the hard work and if doesn't work out find something else that does.
Debenhams did this but the 'brand loyalty' may with the octogenarians and not the youf.
Decided to accept my biggest ever loss and sell Boohoo (LON:BOO) today on a green day. Would be happy to buy back once we see more info and momentum changes.
I tend to find a profit warning is quite often followed by another and isn't an isolated incident.
Also have been seriously unimpressed with the lack of director buying at these depressed levels.
Kamani sold £100m (@285p) worth just over 2 years ago.
Showed he is willing to buy back at lower levels, as he bought £10m (@214p) six months later.
But buys nothing at these depressed prices, (circa 90-100p)
Define a “coffee can stock” however you like, but I’m sure it has something to do with being a winner in the long term and not necessarily in the short or medium term although it obviously could be that too.
Now consider the market place here. Is it not fast fashion?
There are some fashion retailers at the luxury end of the market whose brands have longevity but most fashion is short lived. Just look at how stars of yesteryear such as FCUK that were once all the rage are now a shadow of their former selves.
Now add in the ‘fast’ element. Do the kids that consume this stuff have any brand loyalty? Not on your Nellie! So, it doesn’t take long before the customer base has moved on.
So, this has never been suitable to consider as a coffee can stock. It’s simply in the wrong market to be one. Doesn’t mean that it wasn’t a good stock, doesn’t mean that they weren’t operating a disruptive business model, doesn’t mean they may not rise again on the back of turning round Debenhams (now it’s shorn of the stores).
But a coffee can stock? No way Jose!
When you look at their business model it's essentially:
- React very quickly to fashionable trends.
- Make a load of it cheap and flog it to people.
I am hoping that you can put any future clothing trends into that model. I may be wrong but I don't think people by Boohoo because of the label, like they would have done with FCUK or indeed do with lots of other consumer brands. PLT maybe a bit more, but you don't see Boohoo logos on stuff, in fact I think they actively keep it off there so they can sell cheap tat and their customers can pretend it's not.
I get all the chat about people moving to sustainable fashion, vintage and all that stuff too, but you need either the luxury of time or money to do that.
As we approach a cost of living crisis it is perhaps once again the retailers at the top and bottom of the market who will benefit, those somewhere in the middle will be squeezed.
Yeah I would agree that their moat or durability in the long term is more their wide network of supply and distribution that can get clothes to customers quickly and cheaply rather than any particular brand loyalty. My wife for example will panic she has nothing to wear for a night out, order the same thing in different sizes and then just return the ones that don't fit after they arrive. It's not an ethical way to shop but that's what their average customers are doing (just look at the ridiculous returns rate) and you can't get that from other competitors without the established infrastructure - which is very expensive and time-consuming to create.
Hey! I wonder if its time to start a new thread and a new angle on Boohoo (LON:BOO) ?
I'm not a holder and commiserations to those that are. I had some concerns when price was much higher and I expressed it in this thread when it started building/reflecting views expressed here in Jan 2021 here:
https://www.stockopedia.com/co...
That post was written when boo was bumping up towards 350p. It was an expression of concern mainly around seeming strategic pivot and what that messaged (that implicitly talks to the threat of competition and whether overseas is sustainable). TBH its not yet obvious to me whether I had a point or a bunch of covid and ESG linked things are entirely the negative story.
The year end update and report should give more clarity on what's happening and will be interesting. I am surprised by how far down the price has come but it does illustrate just how hard growth darlings can fall (...it can be justified and it can be unfair...TBD boo).
It seems the argument is now recovery from hiccup versus more prolonged strategic hole. I balance to a blend of the two and the near term share price trajectory will depend on that balance. There is a risk of stated 'strategic review' around international operations IMO and even stronger pivot into the UK and mainstream (so competing against Next (LON:NXT) and Marks And Spencer (LON:MKS) -> that would likely cause much more short term share price volatility but probably creates a new base for value creation and ability to see the upside again after a bit more hiatus...
...or this could all be very overdone and the rebound is now...
perhaps for these types of enduring threads there should be a main post per year. EG this one becomes BOO 2021 and archives off. And a BOO 2022 commences. Just a thought
PS I agree BOO may shift towards another segment/demographic of the clothing market.
However a year ago it seemed everyone on stockopedia seemed to be talking about 'coffee can stocks', and that BOO was firmly in this camp, and those had resigned themselves to never sell BOO as it was a Buy And Hold Forever type-stock.
But not we are in the 90's(pence) there are a lot of folk stressing about the price too. So it was either a) not a coffee can or b) folk are worrying about short-term-ism.
Don't get me wrong, I also hold BOO but my view is now I either take a 50% haircut or think back to early principles behind this invesmtent case and hope Kamani and co can pull off the continued growth.
Investability had a recent podcast ( https://podcasts.apple.com/gb/... )where they discussed cotton futures price was also a headwind. Not looked myself but it goes to show there is a lot of unanticipated events that can crop up and challenge the future.
I think the whole 'buy and hold forever' rhetoric is just laziness. reviewing the fundamentals of an investment from time to time is essential. Boohoo has demonstrated that even this review is not sufficient - the fundamentals are quite clearly not the be-all-end-all. good fundamentals does not mean the share price is going to turn around now, or 10 years in the future, if there are constant accusations of slave labour and poor supply chain working conditions in addition to strong competition and cost pressures.
I sold at around £1.75 having averaged up a sizeable position to around £2.50 ps. i was bleeding DAILY even though the fundamentals of the investment had not changed at the time. But i saw no end to this barrage of constant negative media attention and I think we can all agree there is a change in the air around this company; smells like driving through farmland countryside.
I am pleased to report my portfolio is now sailing in the green. not quite back on track but its a good start to 2022. I really do hope people truly consider the longevity of the affect of this cancel culture - short interest in BOO is rising and the bottom keeps getting deeper.
I hope it turns around for everyone brave enough to keep sinking good money in to this - remember there are other companies with very good fundamentals which are not being attacked in this way.
It's still a coffee can stock. That's the point of coffee can stocks, you ignore the short term. Yes it's painful, but the best performing stocks over 10 years often have 50-75% falls peak to trough.
I went into my local city centre today. It was absolutely rammed. Hardly a mask worn. Isolation and all the other measures coming to an end. The kids are going to be partying hard. Partying hard across the world in new clothes.
If Boo have to tread water for a year whilst they get their distribution woes fixed, so be it, but I actually expect air travel to ramp up hugely this year and for the subsequent cost of air freight to fall.
It's always darkest before the dawn. And if I'm wrong, I've bought an amount I am comfortable losing, as painful as that would be I'm not going bust.
"The kids are going to be partying hard. Partying hard across the world in new clothes".
This is very true! However, i dont think they will be wearing much boohoo. I bet you probably noticed the insane number of people wearing North Face puffer jackets? There has absolutely been a turn towards higher quality clothing and a more vintage style... corduroy flares / mom jeans and pastel colours. boohoo is lagging behind, Asos doing much better job (actually stock North Face coats at £200-£500) and shien is just so much cheaper.
I just think this coffee can idea is flawed and gives rise to massive opportunity loss. The aim of the game for me is not '50x or bust' - and thats exactly what boo is, especially for all the people averaging down the last 18 months.
I dont think we will ever agree on this one Mr Potato, and thats fine! Always appreciate an opposing view - I just think that in todays market the fundamentals do not always mean one should stay invested.
sure I get that, but a stock cannot be both a 'coffee can, hold forever' and 'trimmed and reduced the position' *shrugs*
Which is why I haven't trimmed or reduced the position. Will be looking to add from here. I'll get the results to FY Feb 22 out the way first
From watching the Vox Markets video I believe that Paul still intends to hold a core holding longer term, but he just decided to trim the position size due to the current circumstances. Also I picked up that both Paul Scott & Paul Hill both agreed that in 2 to 3 years time that investors should be looking at a higher share price than now, but had to put up with the volatility in the meantime.
What does give me some comfort in holding BOO is knowing that Mahmud Kamani owns 12% of the Company, he is a fantastic businessman, and I imagine that he is very keen to make Boohoo a success.
What does give me some comfort in holding BOO is knowing that Mahmud Kamani owns 12% of the Company
Interesting. The very same fact is what makes Boohoo (LON:BOO) a bargepole share for me. In my opinion, Kamani puts the interests of himself and his family well ahead of the interests of other shareholders.
I agree with you, but I am hoping that his 12% and his ego will be driving him to get that share price back up.
It can be both. It’s a coffee can, if you always want to be invested. But trading prices/positions up and down on a stock can help reduce average purchase price or % (it can also go wrong too )
ok. my mistake. I had read coffee can as buy, hold and never sell.
It looks bad but you can always look at Next in 1990 - fingers crossed!
Talking about coffee can holdings a friend told me that Paul Scott had either trimmed or sold down his BOO position but he can not remember where he heard it. Can anyone or Paul comment please? I have a very small holding and have been holding off buying more but would be interested in Paul's thinking for reducing now, other than it has further to fall!
yep, here at 20m and 50secs Q&A with Paul Scott of Stockopedia - Vox Markets
Deciding to buy and hold this stock is one of my worst investment decisions in the last few years and the main contributor to my portfolio making zero gains in a year... when is it going to bottom out, FFS? Big lesson on not following the discussion forum hype.
I agree, absolute nightmare stock. Everyday I think this cannot keep going down… but it’s gets worse and worse. Need to hear something confident from the company but absolute silence. One thing I have learnt is when momentum starts to drop and a stock is out of favour get out and stay out until the tide has obviously turned. There is a temptation to get back in too soon.
I think that's true! Thing is, there's such a long list of negatives, not limited to:
I guess the nightmare scenario is exaggerated negative operational gearing - sales growth stalls just as they're spending heavily on new distribution centres.
So, is current forecast PE of 15.8 a bargain, or could it fall further? Results are not due til early May, unless we get another (negative?) T/U. I'm kicking myself for multiple failures to trigger my stop loss as it's been such a slow-motion car crash with so many opportunities to exit on the way down. I think my mind is made up now.
The last trading update said
"The Group intends to provide a trading update for the year ending 28 February
2022 in early March 2022."
Wonder where the bottom is...
Between the back and the thighs.
Trying to pick the bottom can be hairy indeed.
If any male here going to wear boohoo clobber (I assume a sort of drag night out?) then I recommend the full grooming SB&C wax beforehand...
I doubt he shorted Boo. That's ridiculous. He's a company director.
Likely he held a CFD, leveraging £50k in £300k worth of shares and he's now closed the CFD and replaced it with 0 leverage, fully paid up shares.
Downside for him is that he's had to pay the difference on the CFD
thats what I thought. if a director took out a short in their own co there would be a lot more noise, media circus etc..?
Boohoo (LON:BOO)
I don't know about Contracts for Difference but I'm guessing that with todays announcement, Iain McDonald, hedged a holding of about 300k with a bet on the price going down and now has used that to cover a fresh purchase of 300k. How would you do that?
Other news Leicester site starts production.
https://www.leicestermercury.c...
CFDs are leveraged purchases of shares. You can use a broker like SpreadEX or IG to place a buy or short contract at a reduced cost. The broker will then hold or short the shares on your behalf and charge you daily interest to cover the amount you have borrowed. Once you close the contract, then you gain or lose money based on the price difference between opening and closing price of the CFD.
it sounds like Iain shorted BOO, used a CFD to leverage his position size. Closed the CFD. Made a profit and then used the proceeds to actually buy the shares
Thanks.
Ah! I hadn't realised Iain is a BooHoo NED, so I think its unlikely he took out a sell order CFD (probably has ESG / ethical implications betting against a company who is paying you for support). A CFD is leveraged and there is a daily interest amount applied by the broker, for supporting a leveraged trade. Its not a huge amount, but still an on going daily cost.
Thanks Andy, that's unanimous then. I wish announcements would be more informative to avoid doubt. As I said, I had no experience of CFD and didn't realise the daily cost involved. No wonder most people lose money on them.
Hi. I have a little experience in CFDs. I went back through the RNSs. This is my view in what is going on. Iain McDonald held an 'interest' in BOO of 721,336 shares as of 25 Jan. This 'interest' consisted of 300k CFDs and 421,336 owned of'real' shares. On 25 Jan he undertook what is known as an 'exchange for physical', he effectively closed his long 300k BOO CFDs at the prevailing market price, crystallising the profit/loss with reference to the opening position (go back and check previous dealings to see what price) and took delivery of the 300k shares from his CFD provider who would have been holding them in their name as a hedge. His 'interest' in BOO is unchanged although his ownership in BOO is now 721,336 'real' shares. There has been no net selling or buying, if he had however just closed the long CFD, and not taken delivery, the 300k shares held as a hedge by his CFD provider would have been sold in the market at market prices and his 'interest' in BOO reduced to 421,336 shares. There has been no profiting from short selling, in fact the opposite. There are a number of reasons why he might have originally bought CFDs rather than real stock. One of the most common reasons is that you want to buy the stock quickly, maybe you think they are going up pronto but you don't have all the money to hand. When you enter into either a long or short CFD you put a % margin up which in BOO's case might be say 30%. So he would only have put up say £100k to get £300k exposure. But you will also have to pay a daily financing cost on the position CFDs are marked to market so as the stock fell more cash would have been called to maintain margin requirements. No stamp duty on the original CFD but payable on physical delivery if applicable to the stock. This is a neutral transaction and is meaningless to shareholders. Nothing to see here.
Thanks for taking the trouble to let me know.
Excellent explanation Arb
There was a report on the radio this morning that nearly 40,000 tonnes of returned clothes are dumped each year in the Atacama Desert. Chilean Government officals have asked the UK , US and Europe to take action (not clear what action is being sought)
Is this a likely issue for Boohoo?
I am intrigued by Boohoo at these levels - disclosure do not hold.
Might be of interest
EXCLUSIVE Chinese fashion retailer SHEIN revives plan for New York listing in 2022-sources
https://www.reuters.com/market...
Nearly 10% drop in a single day on no news! Have I missed something?
Just catching up with the swooning shares all around is my guess
It's trading in a range. It has been bouncing between around 110 and 120 for a while now.
Mildly eye-opening podcast on the latest hot trend – reusable fashion. Several marketplaces have started to facilitate both the resale of fashion and renting out stuff (hence ‘’fashion as an asset class’’). More upmarket than ebay, eg designer name frocks in the $500 range and bags even more, and with much more sophisticated websites. Some cater for blokes as well as birds and extend to watches, jewellery etc. Podcast says market cap of the quoted players is $8bn with 50% pa sales growth in some companies and 2025 forecast sector revenues of $77bn.
Appeals to younger, environmentally conscious, consumers concerned at the detrimental impact of fast fashion – claim that ‘fashion’ now accounts for 4-10% of global emissions, even more than aviation. Curiously (to me) the concept has developed first in the US (which I assumed was the ultimate throwaway society) and is now spreading to UK/Europe and the east.
Couldn’t help but notice there’s no mention of a ‘returns problem’. One of the sites I skimmed had a really detailed (intrusive?) questionnaire about all aspects of body shape, so perhaps that’s how they minimise the issue. I wonder, maybe it’s primarily a UK problem encouraged by the free returns culture/cancer that appears to be exploited by some – and perhaps ‘consumer protection’ laws have encouraged this; I haven’t checked.
Companies mentioned include DePop, TheRealReal, ThreadUp, PoshMark, RentTheRunway, ByRotation. Most of the share prices have come off hugely, even more than BooHoo and Asos. Possibly there’ll be a growth opportunity when (if?) they finally bottom out?
https://www.economist.com/podc...
There have been shops in the UK doing this for many years now. More recently there are online selling sites, I have seen one advertising on TV.
The problem with returns is, you often have to order excess of a certain amount, to get free delivery, but then you can return for free.
Sizes are all over the shop, I can order the same size from different sellers and they will probably be all different, it is not just chest or waist size but also length and sleeve length, women probably have even more issues then men. They are often different from what you expect, colour, size, fit, I would not buy unless there is free returns.
It is a two edged knife. If free returns become charge less people will buy online. Which makes me wonder, are the return sales deducted from the revenue sales or are they part of the revenue?
I personally do not buy cloths online because I want to see them in person and secondly I rarely find cloths that fit properly the first time. It’s all very well saying check your measurements and read the reviews because every brand seems to have different sizes.
the only cloths I have bought online in the last year were some undies. I’m a thing bloke, usually buying medium size to xl. I’m only about a31inch waist but really struggle to get the right size. The undies I bought were first a medium. I found them a bit tight on my waist. Ok if I’m stood up but if sat down for any length of time I find uncomfortable. I made a second purchase of these undies at a large size. Better but still a little tight. Seriously, I’m just small, people comment how thing I am? I really wouldn’t dream of buying jeans online despite being able to return but I do realise I am probably in the minority here.
on an ESG view this is terrible news indeed but if they charge to return then revenues will surely drop.
I don’t know what the solution is, but I imagine this will have to change some time soon as the world seeks to reduce carbon emissions.
Obviously I meant thin and not thing. This is what happens when you get older, using a phone, eyes deteriorating and as they say, fat fingers despite the fact that my fingers are THIN! Let’s not even go on about text talking or commonly known as predictive text!
Theres a place in Hull reserved for the inventor of predictive text.
An article in The Guardian today on returns from online shopping this Christmas, specifically mentioning BooHoo. I haven't looked into the ZigZag and Rebound data yet (does anyone have experience with them?), but a 24% and 40% surge in returns has been presented by them respectively. This was reported last year with the trading updates, so it's not exactly new information, but a worthwhile read given the scale and costs. Let me know your thoughts.
https://www.theguardian.com/mo...
Thanks. Truly, deeply shocking report! It seems the industry has missed an opportunity to knock heads together, work with regulators as needed, and discourage/find solutions to this wasteful practice. At the very least, impose a fair returns postage. The whole culture needs a reboot/re-education - if I buy a garment that 'doesn't fit' isn't that primarily my fault for not measuring properly and reading reviews with comments on sizing? OK, as a mere bloke I don't buy clothes other than cycling garb, and lycra is stretchy and I do read reviews thoroughly, but I don't recall sending anything back in the past two years.
The 'wrong colour' excuse sometimes touted is odd - I heard the other day that several $bn of artwork is sold online each year, displacing traditional galleries and auction houses. Surely that shows people are prepared to make a huge financial commitment on buying something they haven't seen in person? You don't hear of it being returned 'because it doesn't suit my drawing room' etc.
Although not a BooHoo issue, comments on the returns of electrical goods are just as staggering. Surely in 95% of cases the product does what it says on the tin - if it's not what you wanted then don't use it and pay a fair price to return it unopened/unused. Admittedly Xmas may lead to some 'unsuitable' gifts being given - surely the simple answer is to give a voucher instead of second-guessing what the recipient may or may not want? World gone mad, in my view.....to the ultimate detriment of shareholders.
I expect I'm the only Guardian reader here, but fascinating imported article on the success of Shein - has roasted Boo at its own game of quick-to-market https://www.theguardian.com/fa...
Question is, how long will Shein remain top cat before being toppled?
Thanks for the link to the Long Read article - I find the long reads a fascinating insight into global issues from international journalists. Well worth a gaze through the back catalogue.
Why do you think that 'Shein - has roasted Boo at its own game' ?
As the article doesn't mention BOO - but focuses upon Zara, H&M and Amazon - I can't see how it shows that Boo has been roasted at its own game?
I can see that Shein represents a bigger and more direct impact to the established global clothing retail order - and as the article suggests - is intensifying a race to the bottom. But who would want to be at the bottom of that heap?
In answer to your question. I have no idea. I'm not even sure that Shein is top cat? Or that there will be a top cat at the bottom of that heap?
cheers
Mark
Find it almost amusing that the UK media plus news paid for by companies with vested interests to make shares prices drop, are fine on taking pot shots at Boohoos operation, where some suppliers may or may not have paid less than minimum wage and suggesting their operation is not fit, yet these same news organisations seem to say nothing about Shein who’s operation is Chinese based but nothing I’ve seen mentions how much their work force are paid or their working conditions…….seems like it’s not a level playing field and stacked in favour of companies that do what they like ‘offshore’ . Boo maybe better off shoring their operation as there seems to be no scrutiny or moral view if it’s in another country.
so true. It’s pathetic really
The article seemed very critical of the Chinese working conditions to me. It was also critical of the quality of the clothes and the service provided as well as the outright copyright theft rampant in industry.
Ties to the CCP and the mass harvesting of Western data through overly intrusive apps that ignore privacy concerns is the next big scandal to come. We almost had it with TikTok app but it disappeared as a story in a way that perplexes me.
Not at all. I gave up my FT and IC subs a few months ago. At whatever it is £800 a year it was just too expensive. Besides Guardian gives another perspective.
Thx for the link.
Regards
Michael.
Na. Please to say there are two of us Grauniad readers on here.
Norges bank notify the purchase of around 1m shares. They seem to have 3.4m on loan if I'm reading this correctly. http://newsfile.refinitiv.com/...
I thought this may be useful. Apologies if it's already been linked, I haven't been reading all of the history.
My takeaway from the article is that competing against Shein is not competing (globally) again one retailer, but more like one thousand low cost producers. I think Boohoo (LON:BOO) 's more upmarket brands will do much better internationally. I have no position.
https://restofworld.org/2021/h...
It will be good to see some directors buying shares at these levels, 2 directors sold 50m shares at 285p and have not bought that many back.
I bought some on Friday for 99p, I think that is too low considering the profits, yes growth has slowed I feel the drop is overdone but we will see how it goes.
Seems like there are 3 key things things being discussed in this thread. The small one is the purchase of the HO. I agree with the post that says that frankly, this isnt a big deal for a company the size of BOO these days. At worst they sell or sell or least back and like a retail trader lose a few % in trading friction costs.
The second is the slowness to set up non-UK, especially US distribution centres. In hindsight this was a mistake. At the time it was marginal - it reduced the risk/cost of expansion to the US that has killed many UK companies. Now they have the sales, it was a mistake but if the Nasty Gal aquisition had been a disaster then retreat would have been painless. There will be a cost from getting this wrong but no reason to sack mgt.
Finally, the big one. How sales are/will do and under which brands. Is Debenhams a coiled spring starting to show real traction - in which the UK business alone is worth more than today's share price. The the latest round of other brand additions doing well and covering up weakness in the core? Is Shein really eating the US businesses in both West and East coast markets. At the moment on the publicly available info we don't know (my view).
It is noticeable that big instis have NOT stepped in as share price has cratered - but the legacy of the ESG issues may be causing them to hold back even if they have been largely addressed in this country (by exporting the abuse to other countries if we want to be political for a moment - even though I believe that this is actually good for the poorer countries and their people......unless it goes to now middle income coastal China cities!!)
Private traders are in a funk driven by Covid/loockdown etc and the fear of share prices dropping like they did in March 20. So sellers are meeting few buyers. The share price has dropped by 1/3 in 10 days and 2/3 since July 21. Only reason 3 - Shein etc eating Boo's now and future lunch across the range justifies this.
I bought in at around 160p and now plan to buy more. I think the business make be about to retreat from global success but the UK is still well placed to be a huge success. How much would a 3Bn turnover business, all from the UK and easily accessed markets be worth in 3-5 years time - much more than the current share price I'd warrant.
A few years ago Boo was nothing......then it dreamed of of global glory. Few do that. Large success however still seems very possible. I hold and hope to pick up some more as Christmas bargains as a sale seems to be on !!
Not sure why people are hammering management about buying a property in which to house their teams - spread across several buildings and spread across several leases.
With hindsight it would have be great to predict the global freight costs - and built a warehouse in the US quicker than planned.
But it seemed a fairly reasonable use of money at the time - not amazing, I wasn't over the moon about it because it's not adding to the revenue line, but not massively wasteful either - considering the reductions in property costs and new brands coming on board.
'Shares in freefall' is a term rarely used https://www.thisismoney.co.uk/... BOO blames it on omicron. Comments on the article aren't universally positive. But DM readers can be grumpy.
What puzzles me about the fashion industry is how they've allowed themselves to be boxed into a corner in offering endless 'returns'. If that's postage free, especially overseas, that must really hurt. Someone here talked of punters buying 4 items and returning 3! - sounds a bonkers business model to me. Surely they can make a modest charge to incentivise people to buy the right item in the first place? There was talk on these (?) boards a couple of years ago on how smartphone tech might be developed to ensure people buy something that fits them from the get go, but sadly nothing came of it.
Strikes me that the logistics companies should be the real beneficiaries of this craziness!
Also heard a podcast (SYSK?) a few weeks ago about the short-lived fashion for paper dresses in the (19)70s. Essentially they were worn once then chucked. Sounds a precursor to Boohoo.
It is not just the fit but it is the colour and material. I ordered clothes that look good on the screen but when They arrive they look different, colours are often well off and the material not what I expected. In a shop you can see what you are getting and try them on. Now I never buy clothes unless I can return them free. I’m not sure what the answer is. Some companies put some effort into sizes such as Uniqlo. I don’t have a smartphone. With 1,000s of clothes, different styles, made in different factories, I think it would be almost impossible to get the same sizes. If they charge for returns then sales will plummet.
Think about this from an environmental point of view too. We're basically pointlessly driving around vans full of clothes constantly!
Agree. I asked in Sports Direct if I could return a top if it didn’t fit my son, to which the answer was yes for creditnote or exchange - no for a money refund.,
That is buying in store, not online? Different rules apply.
What I wonder is, if Boohoo (LON:BOO) is great value at these levels, why Kamani and Kane haven't bought any shares?
timarr
Paul I have to take you up on this one. The only people that should be apologising is the Boohoo (LON:BOO) management. Shein have exploded on to the scene since the wide take up of ticktock last year. The boohoo management missed a trick by not marketing effectively on that platform. The very fact that sheins revenue has gone parabolic globally indicates the opportunity was there and it was badly missed.
Oh, you think that Shein is a private company there to make money. I'm sure you're right.
The Lesson We’re Learning From TikTok? It’s All About Our Data - The New York Times (nytimes.com)
What is that Warren Buffet quote we see every time we log in ?
Was it:
On investing in 1974: "I feel like an oversexed man in a harem. This is the time to start investing", or
On over-diversification: "If you have a harem of 40 women, you never get to know any of them very well", or
On becoming a true investor: "We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a 'romantic.'" ?
Let’s us hope that
“What is comfortable is rarely profitable” - Robert Arnott
is the applicable quote with respect to Boohoo (LON:BOO) We have the discomfort in spades, let us hope that the profitability will follow!
Note according to SCVR this morning Paul sold his £ASOS holding to buy more Boohoo (LON:BOO) I am considering it but not sure I have the cojones to do so.
Also remember what Baron Rothschild reputedly said:
“The time to buy is when their is blood in the streets”
Have a good weekend
Regards
Michael
Ouch... this hurts...
BOFA CUTS BOOHOO TO 'NEUTRAL' (BUY) - PRICE TARGET 130 (300) PENCE
BARCLAYS CUTS BOOHOO TO 'EQUAL WEIGHT' (OVERWEIGHT) - PRICE TARGET 135 (395) PENCE
INVESTEC CUTS BOOHOO TO 'SELL' ('HOLD') - TARGET 95 (170) PENCE
DEUTSCHE BANK CUTS BOOHOO PRICE TARGET TO 230 (370) PENCE - 'BUY'
JEFFERIES CUTS BOOHOO PRICE TARGET TO 165 (430) PENCE - 'BUY'
GOLDMAN SACHS CUTS BOOHOO PRICE TARGET TO 210 (420) PENCE - 'BUY'
JPMORGAN CUTS BOOHOO PRICE TARGET TO 230 (480) PENCE - 'OVERWEIGHT'
Analysts so quick to the party as usual- does anyone really take any notice of these?? Moreover by slicing them so much, it's like they've suddenly woken up and decided to put their tin hats above the parapet!
Couple of new broker downgrades
Investec cuts to sell, target 95p
Deutsche Bank cuts target to 210p (420)
Clothes sales back to pre-Covid levels in November
"Sales of clothing rose by 2.9% in November and were 3.2% higher than February 2020"
Unfortunately called this one completely wrong at 180-200p level.
Some brutal downgrades from brokers today-
Barclays target price cut to 135p from 395p
JP Morgan cut to 230p from 480p
Jefferies cut target price to 165p
With all the uncertainty, covid, air freight prices etc I'd say <120p is about right just now. Zeus have EPS coming in at 5p then 7.3p next year. Possibility I think this could be downgraded again if supply/delivery doesn't show signs of improving short term.
The lack of director buying so far at this price is amazing considering how bullish they sound long term.
Now the trading update is out the way I can only see 2 reasons.... they cannot buy because they're in possession of price sensitive information or they think things will get worse so they're in no rush.
Kamani purchased over £10 million last year on the drop to £2 having sold £99million at £2.85 the previous year.
I'd be expecting buys of at least similar size if he really is so bullish long term.
On the plus side this is sector wide, it's also a terrible market right now which doesn't need an excuse to sell anything off. Supply and freight costs should start to normalise at least in the medium term. They still have a reasonable net cash position and UK growth is continuing. It looks like it'll be a long haul tho.
The report reference returns as an issue and talking to people yesterday, buying 4 returning 3 seems to be common practice. Whats steps do people think a retailer such as Boohoo can take to reduce this.
I think some of that is to get free delivery, Amazon do it, spend over £20. This encourages people to spend more but then they can return items for free. With clothing it’s tricky because you don’t really know the fit or the look until you actually get the item, I have found colours are often not what I expected. I have returned quite a lot clothes. Unless you know exactly what you are going to get this will happen with online shopping. Buy 4 and hopefully there is 1 you like. Buy 4 and keep the best one. Distance selling regs favour the consumer.
Boohoo (LON:BOO) now available for 99p
Something else that occurred to me, was that I've followed Asos (LON:ASC) since it floated, always perplexed at the sky-high valuation. So much so, that I sold my 500k Asos shares at 9p, having doubled my money LOL! Not one of my better decisions.
Along the way, there were several times (you can see 3 on the chart below since 2011) when the market got cold feet about it going ex-growth, and the share price plunged by half to two thirds. Then growth resumed, and it went back up again. Those were all good buying opportunities.
I wonder if the same might happen with BOO now? Especially as the company has clearly stated it is expanding its distribution centres to be able to cope with >£5bn sales, including a much-needed distribution centre in the USA scheduled for 2023. Plus of course all the new brands that are currently being rebuilt, a big job that takes time. Maybe mgt bit off more than they could digest with all these new brands? Plus all the distraction of ESG issues in the last year or two that must have taken up a lot of mgt time. As those issues clear, then there's upside from growth. Does it matter that growth in 2022 might mainly come from new brands? Not to me. Growth is growth.
ASOS long-term chart -
.
A final point, is that BOO is not uniquely bad at the moment. This is largely a sector move - here's the comparison of BOO & Asos for 2021 YTD -
Paul, the problem is the competition has changed significantly in the last few years and could get worse. The sales they are getting have to come from somewhere and the last 2 years have benefitted online sales. Yes Asos (LON:ASC) are in a similar position to Boohoo (LON:BOO), although I think their forward planning has been better. I think spending all that money on a building in London was a mistake, should have leased it and then used the money for distribution centres in Europe and US, they could have leased those as well to start with.
Rustbucket,
Yes I agree there is increased competition online these days, fair point.
As regards this -
"I think spending all that money on a building in London was a mistake, should have leased it and then used the money for distribution centres in Europe and US, they could have leased those as well to start with."
It's not an either or. There's no financial constraints on opening USA or EU distribution centres, they can do that as well as buying the Soho office block. But there's a lot of planning involved, when opening large distribution centres, it can't be done overnight. BOO has been concentrating on automating its UK warehouses this year, which has a good return on investment, and delivers a lot of cost savings (greatly reduced staffing), yet to feed into the figures, so there's upside from that.
Buying the freehold Soho office obviously made sense financially, or they wouldn't have done it. Plus it's an asset they can borrow against in future, if cash does get tight.
Everything I see about BOO shows a business that's been expanding at break-neck speed, and has run into a range of problems, mainly external, and all fixable in time. Hence in my view the US/EU growth has just paused. The upside case is that we could see a double benefit in 2022-23 from earnings estimates rising again, and the PER increasing again. Or it might not, we'll have to wait and see.
Regards, Paul.
It's not an either or. There's no financial constraints on opening USA or EU distribution centres, they can do that as well as buying the Soho office block. But there's a lot of planning involved, when opening large distribution centres, it can't be done overnight. BOO has been concentrating on automating its UK warehouses this year, which has a good return on investment, and delivers a lot of cost savings (greatly reduced staffing), yet to feed into the figures, so there's upside from that.
Buying the freehold Soho office obviously made sense financially, or they wouldn't have done it. Plus it's an asset they can borrow against in future, if cash does get tight.
It all reminds me a bit of Laura Ashley though. Did they really need to buy an office building in a trendy part of London any more than Laura Ashley needed to buy an office block in Singapore? It's like baking a cake and then putting the icing on when the cake is still hot. I must be in a minority of people who think it is a lousy misallocation of capital then, which falls firmly at the feet of management. The decision to prioritise an office block over improved distribution was an own goal. I don't see any other way to view it.
All the best, Si
It depends on if you trust management. If you trust management, and I do, and think the property in London was being sold for an absolute steal then this is awesome. At the time we were at peak fear, so I do think this would be the case. The revaluation gives the business a great asset to borrow against should the need for cash be required. You could probably do some digging and find out how much it was bought by Boohoo for and how much it is worth now. I think someone on here will probably do that and I'd wager that this would already show a very healthy capital appreciation. I still have to work for a living so I will not do the research myself until the weekend. If you read all the financial statements over the years, and listen to their presentations, you can see that they are always looking at distribution and manufacturing centre opportunities. This is not lost on them.
It depends on if you trust management. If you trust management, and I do, and think the property in London was being sold for an absolute steal then this is awesome. At the time we were at peak fear, so I do think this would be the case. The revaluation gives the business a great asset to borrow against should the need for cash be required. You could probably do some digging and find out how much it was bought by Boohoo for and how much it is worth now. I think someone on here will probably do that and I'd wager that this would already show a very healthy capital appreciation. I still have to work for a living so I will not do the research myself until the weekend. If you read all the financial statements over the years, and listen to their presentations, you can see that they are always looking at distribution and manufacturing centre opportunities. This is not lost on them.
I don't trust them, quite frankly. How many own goals do you need to score before you find yourself sat on the bench? And Boohoo (LON:BOO) is not a property company last time I looked. If I want to invest in London property I'll buy a REIT, thanks.
Anyway, I haven't read all of this thread but from what I have read there's more than enough classic groupthink and behavioural biases on show that a behavioural economist could write a PhD thesis.
All the best, Si
One of my rules on investing. Research management and if I cannot determine if I can trust them, I never invest. If that trust breaks down, then I will also exit. This is not a one size fits all, it can be very subjective. I remain an owner.
"Did they really need to buy an office building in a trendy part of London any more than Laura Ashley needed to buy an office block in Singapore? It's like baking a cake and then putting the icing on when the cake is still hot."
It's an investment in an asset that adds value to the business in loads of ways. Financial, PR, HR, marketing, probably even sales. It really is absolutely nothing like baking a cake, icing or not.
”The decision to prioritise an office block over improved distribution was an own goal.”
Agree entirely, terrible capital allocation by management and they should be made to explain their reasoning behind it.
There maybe a good reason behind it but I can not see it and if there is they should enlighten shareholders, otherwise we are just going to think it is an ego trip for management.
Further there must be central London leases going for song at the moment.
Regards
Michael
What is better, sitting on a pile of cash that earns nothing. Or using some of that cash to buy the freehold of an office block, instead of leasing it from a landlord, giving him a rental yield of say 5%?
Surely that is good capital allocation? It's essentially earning 5% on the cash, from owning the building, instead of earning nil from the cash in a bank account.
And they can do the overseas distribution centres too, it was never buy a building OR do overseas dist centres.
Some muddled thinking on this thread, in places!
P.
What is better, sitting on a pile of cash that earns nothing. Or using some of that cash to buy the freehold of an office block, instead of leasing it from a landlord, giving him a rental yield of say 5%?
Surely that is good capital allocation? It's essentially earning 5% on the cash, from owning the building, instead of earning nil from the cash in a bank account.
And they can do the overseas distribution centres too, it was never buy a building OR do overseas dist centres.
Paul,
I can't believe you've written this. I couldn't disagree more!! If you were given a choice of a 5% return or a 25% return, which would you choose? Because for FYs 20 and 21 Boohoo (LON:BOO) achieved a ROCE of > 25% according to the Stock Report. It seems from reading your comments below that you don't believe Boohoo (LON:BOO) is ex-growth, even though by plumping for the 5% return that's exactly what they are telling you i.e. they don't think they can achieve a return better than that by using the cash to expedite local distribution centres in the US and EU. I mean, it's not like they didn't have enough time to see Brexit coming, for instance :-)
No, what they did was make the terrible assumption that the cost of building distribution was not a priority because they could enjoy cheap freight ad infinitum and ship all orders from the UK. How wrong they were! I can't see that situation changing anytime soon and yet we're told the US distribution is due in 2023 by which time all their US customers will be so fed up waiting ages for delivery (so much for fast fashion) that they'll have gone elsewhere. I don't believe there is much in the way of brand loyalty in anything that's cheap as chips FWIW and so what loyalty there is will be destroyed.
Some muddled thinking on this thread, in places!
You're right, but I'm saying nothing...
All the best, Si
“I don't believe there is much in the way of brand loyalty in anything that's cheap as chips”
Good to know you think they’ll bounce back quickly once air freight returns to a semblance of normal, hopefully early next year as the Omicron scare plays out and we all realise later Covid mutations are the new common cold.
Good to know you think they’ll bounce back quickly once air freight returns to a semblance of normal, hopefully early next year as the Omicron scare plays out and we all realise later Covid mutations are the new common cold.
Don't put words in my mouth. I said no such thing. In fact I said the opposite and would assume the worst case i.e. that freight costs will stay high for much longer than you indicate.
Si
You can't have it both ways. You can't claim that "by which time all their US customers will be so fed up waiting ages for delivery (so much for fast fashion) that they'll have gone elsewhere", intimating this is a big issue, then say “I don't believe there is much in the way of brand loyalty in anything that's cheap as chips”.
Which is it, brand loyalty is important, in which case people will keep using the Boo brands. Or brand loyalty isn't important and as soon as Boo get their distribution sorted, all other things being equal, the customers will come back so no real long term harm done.
And regarding freight costs, I assumed nothing. I said "hopefully". Hopefully isn't a prediction or an indication.
A post that isn't going to win me many friends on this thread
Freight costs aren't going to be dropping any time soon, they will persist for a good while yet, and when they start unravelling to something like a status quo don't expect rates to return to the old normal, confirmed by a US haulier I was listening to last night. Its the perfect storm we are all now painfully aware of, exceptional demand (unlikely to slow down) , constrained capacity (likely to persist), and a system that is completely clogged up (containers and freight in the wrong place either full or empty). Some base costs will have increased, and with them an expectation of their persistence.
Boohoo (LON:BOO) I hold, goodness knows why, my target now is break even, and I will achieve that ,but not by catching falling knives. Once it finds it's bottom I'll trade the horizontal, I am pretty convinced that it will not achieve the lofty heights it had before, weaker margins and competition will put pay to that.
Fast fashion I'm afraid will eventually succumb to the ESG conscience of the buyer, clear as day that this will happen within the next few years. Quality, durability and ESG credentials will decide who survives in the rag trade moving forward.
buying a freehold asset in london, isn't money lost. Suspect the price was favorable to Boo given covid has depressed London office prices. Management may not have been able to deploy the cash on investments that returned faster at this point in time, given they have recently acquired various brands and have deployed cash fitting out warehouses and distribution centers, Maybe this is parking the cash until they can re deploy the cash for faster returns, suspect they could take a mortgage out on the freehold or sale and leaseback it, to get the cash back out.
There maybe a good reason behind it but I can not see it and if there is they should enlighten shareholders, otherwise we are just going to think it is an ego trip for management.
Well, I'm sure they're not going to tell you the real reason because it's a nasty combination of vanity and hubris IMHO. Certainly, it is a terrible use of cash for a company that enjoys very high returns on capital. The only examples I can think of by way of comparison will put your teeth on edge - Ted Baker buying the ugly brown building just before things went tits up? That wonderful office block in Singapore that Laura Ashley used all their cash on just before the brown stuff and fan got too close? It even smacks a bit of good old Fred Goodwin spending £350m on the RBS HQ at Gogarburn a couple of years before the GFC.
All the best, Si
The problem with this line of reasoning is this:
The management aren't sat there twiddling their thumbs all day. They only have so much time and capacity to solve complex problems. If it was just a case of throwing £70m at the US distrtibution issue, they'd already have done it. But it isn't, it's a hard, complex problem that needs time and proper consideration. The Debenhams and other brands they bought in a opportunistic manner when they became available has sucked up the management team's capacity. And then came Covid which made the US distribution system (that was working adequately up to then) a bigger problem.
The new HQ move would've been a tiny problem in comparison and easily delegated to juniors as it doesn't have long term ramifications for the company. The HQ had little to nothing to do with the US distribution centre - they've got more than enough ways of raising £70m if they need it.
There's a concept in economics called opportunity cost. The opportunity cost of investing heavily in US distribution centres is the opportunity lost to get Debenhams up and running properly. The management prioritised Debenhams, as that workload calms down, US distribution ramps up.
You seem very angry and prone to hyperbole. Chill, it's only money.
Investing in a property in central London was a clever move. One of the most desirable locations in the world, it’s a highly valued asset now. And leasing rather than purchasing just adds to overheads which contribute to margin erosion. So a no-brainier really.
BOO are debt free (how many of their competitors can say that?) with plenty of surplus cash, so it’s not an either/or situation between London office vs international fulfilment centres. Whether owning these fulfilment centres or not, the cost pressures come from freight, and the products would be still need to be shipped to those territories in the first place.
This means the biggest challenge is to the manufacturing network, not the distribution.
I posted the above in response to Rustbucket, and then noticed Paul’s response to that same post. Apologies for unknowingly repeating similar views - still, great minds think alike!
Barclays cut target price to 135p from 395p
JP Morgan cut to 230p from 480p
A large part of their current supply chain issues can be traced backed to the fiasco that is Brexit - the gift that keeps on giving. One of the reasons why the majority of my portfolio is now in non UK business, or at least those that should be relatively immune to a future slowdown in the UK economy. Supply chain issues aside, I have no intention of buying BooHoo even at current price, as I strongly feel this is now ex-growth and will be priced accordingly.
A small part is Brexit.
The large part is covid. Remainers, the wounded party that won’t shut up.
Yes of course Brexit has very little to do with it. Hilarious! That will what you will continue to trot out as the UK economy goes down the pan over the next few years.
Meanwhile, back in reality:
OECD: UK muscles out G7 to top economic growth rankings (cityam.com)
OECD: UK muscles out G7 to top economic growth rankings (cityam.com)
Probably related to the UK having the worst contraction in GDP since 2019 of the G7 countries. But will it be a recovery or a dead cat bounce?
GDP is complex and not a good measure unless you know exactly what you're looking for.
If we look at the comparative figures pre and post pandemic then the UK was the worst performer of the G7 and now appears to be recovering fastest. However, that masks the fact that the UK measures healthcare and education differently (and more accurately) than the other major economies - and as those sectors were shut down during the pandemic the UK's performance looks worse. And now, on the other side it appears to be better.
In truth neither is correct - the UK's GDP performance is probably similar to other major European countries.
https://commonslibrary.parliam...
timarr
And ESG is just forgotten. Remoaners the party that is always...
I've only got questions and not answers for Boohoo (LON:BOO) which has been my perspective all year.
Quite a knife edge fundamentally IMO as a poor Q4 and/or poor further trading outlook into fy22 ("structural headwinds in US/Europe etc") means they need to either 1) slowdown capital investment and/or marketing spend, 2) raise funds at low price (or leverage up) to double down on current model or 3) de-growth...maybe global ex UK by not pursuing Europe and/or US and focusing investments and growth on UK
If I believed in the long term prospects and strategy as is (ie global growth) then I'd buy at this point and accept the chance of further short term pain. I'm willing to look through and take risk (I buy many stocks when others puke them short term) but this one feels like it might need to announce an identity shift and so that has still to be digested in the price which could cause further considerable pain.
There's a chance that going private with founder support may be the best route for the business (not shareholders!) if investing to power through a sticky patch due to size/competition/market changes/necessary strategy change/etc. I'm not forecasting this, just pointing it out.
Agree that taking it private might be the best route for the business (as you say not for shareholders) and Director buying might be key to watch (either way). Given the c£70m property purchase in Soho recently would seem strange to me to raise equity at these low rates as opposed to a sale & leaseback on the property where i would expect a yield of sub 5% (equity raise would be much more expensive depending on where you calculate their WACC at current SP). I still believe in business model given UK growth of 32% again this quarter (albeit not clean LFL) but they need to decide what they are going to do in the US. Either build a proper distribution channel to get lead times down c7 days or exit. Looks like they are “half pregnant” in the US and EU and that never ends well. For clarity I still hold and bought more today but its got a high beta now…..
Been watching short interest mount on Boohoo (LON:BOO) over the past while given its influence on AIM and sentiment. Today's gap below the pandemic low in 2020 may prove an over reaction and looks capitulatory given the volumes (that '20 low was an obvious area of demand)
From a purely technical perspective price is in no-man's land at the moment in my opinion (with no obvious support/demand areas other than around 85p). 100p may prove a buying zone just one a round numbers basis.
Keeping an eye for TR1 announcements / changes shorters might signal some reprieves.
Sympathies to holders, this has been a cruel ride.
'Borrowed' from ADVFN ... Where are we now?
Perhaps a rhetorical question?
I would say 'despair', at least that's where I am with this share.
I feel your pain. But, while that graphic conveys a very compelling story, it's worth bearing in mind that the slope of the 'return to the mean' line is not a given.
No matter the short term, it's the fundamentals around the 'return to the mean' line that really count. I think the rttm line is definitely 'down' but, equally, far from 'out'.
Agree ... there is a clear danger that the capital costs of building a fit-for-purpose distribution infrastructure will kill BooHoo as a growth stock. It seems to be well behind the game strategically, has failed to anticipate the impact of Brexit, and has a business model that has proved extremely vulnerable to Covid-19 disruption.
Bad luck, to a degree. It had a strategy that might have worked well absent Covid. But it is years off the pace now, given that Covid actually happened.
Eh?
They've got an excellent record in terms of constantly updating and improving their distribution capabilities and have invested in capacity ever since they listed, always trying to be ahead of the growth (don't want to do a Creightons!).
Boo have grown total sales 60 odd % over the last two years, not bad for an organisation you imply has an unfit for purpose distribution infrastructure. They've recently needed a load of cash to sort out the logistics for Debenhams and the other acquired brands which came out of nowhere regarding the long term planning (but was too good an opportunity to pass up). Once done that's all money (and more because of the growth) for the US / ROE / ROW logistics. That delay caused by cashflow is probably why the US DCs are scheduled for 2023 and not sooner, it's when the capital is going to be available. They can't afford to let Debenhams slip from public conscious. They bought the brand and the brand needs to be protected by building the Boo owned enterprise from scratch. In the US they merely need to tick over the business in terms of investment until cashflows ease.
General gripe - I find it funny that a lot of people wonder and complain about businesses sacrificing long term planning for short term appeasement of shareholders. I think Boo pretty much sums up what happens if boards have short term problems and why some boards have that laser focus on the short term over long term. Some investors just can't see beyond six months or the amount of effort needed to build businesses.
Anyway, up the longs, down with the shorts and to those sitting on the sidelines let's hope the narratives and price action start swinging the other way so you can join the party.
I hold.
A stink buy order has just been filled after a higher priced one was rejected.
Yet Wall street is up.
This is a weak share that could get weaker but there is a bottom. At some point the short interest will have to be covered.
https://shorttracker.co.uk/com...
Some serious towel-throwing or white flag raising going on........volume is huge, 53m as I write, but who is capitulating is the question! Recovery looks perilous to say the least.
As a read across Asos (LON:ASC) and Quiz (LON:QUIZ) down 7% and 8% respectively today. Actually, the charts of Asos and Boo look very similar since the bounce September last year. Reads like the market is basically pricing in these retailers can't get supply and delivery actioned, in this supply-chain environment. Compare Next (LON:NXT) which has held up ok, although it is hybrid stores and online.
Paul, I'm sorry you're having a tough time with this name and I literally share your pain and with no rancour towards you. I originally bought back in July '20 at c.200p and have traded with good fortune such that my percentage net loss, even after today's slump, is still only in the low 20s%. But that's just arithmetical prestidigitation to obscure the fact that my highest purchase at 330p is down a cool 65%.
But one question nags at me relating to portfolio construction. You often describe this as one of your largest positions yet you seem to have so many positions overall that I can't imagine it is fundamental to your performance. Or am I wrong? Are you a serial acquirer of tempting names but a high conviction investor in just a few (Boohoo, Saga etc)?
Not in the least offended if you don't want to provide details but I had hoped to learn at the feet of the master, be that from his errors or his smart portfolio management!
Paul shone a light on his holdings some 6 months ago.
At the time Boohoo (LON:BOO) accounted for 13% of his porfolio.... given the subsequent share price performance, probably well less than 10% now.
https://www.stockopedia.com/co...
At the time Boohoo (LON:BOO) accounted for 13% of his portfolio
Ouch. That must hurt. Here's hoping for better news in the next earnings report.
This looks like a Mark Minervini 50/80 rule stock. "When a secular leader makes a major top, there's a 50% chance it will drop 80% and an 80% chance it will drop 50%. The average decline of a former leader is more than 70% peak to trough."
A good lesson in how vital stop losses are.
There is a great possibility of a fund raising here if the trend continues into Q4.
I agree with this risk and don't see it addressed by the bulls. I think its not much thought about yet but I expect it will come into people's minds as they ponder how the holiday trading period might have gone. Any push up in price from here seems likely to be weighed by raise worries absent a robust TU
Are there any bulls here????
When Something falls 80% ; it’s just wishful thinking!!
Wishful sinking, more like.
the time to buy is when there are very few bulls and the time to sell is when everyone thinks it can only go one way.... up.
I'm definitely tempted at around 100p but am also wary of any potential additional funding risk. I guesstimate there's only around a 20% chance of additional funding being required but that's still quite a high %age chance. I might buy a third of an allocation at around those levels and then wait, add if there is a placing and add further as and when (if) things turn around.
Mojo is probably right that any bounce from here may be sold into until raise worries dissipate though so I'm not necessarily in a hurry.
Definitely a risk (albeit not easy with relatively low institutional holdings). A sale & leaseback on the property in Soho would seem more sensible in the short term raising c£60m sub 5% yield
Sosandar (LON:SOS) demonstrated how flexible online businesses are when they hit a rough patch. During the pandemic, it slashed marketing spending, and ran at breakeven for a year, even when previously it had been a heavily cash burning business.
In the case of BOO, it is guiding for marketing spending this year being 11.5% of revenues, and is being maintained in order to keep pushing forwards. If cash did get tight, then it could easily dial down marketing spend to conserve cash. There's also the Soho office which was paid for in cash, about £70m from memory, plus distribution centres that could also be used to raise finance, if needed.
At the current share price, I think there's zero chance of management (big shareholders still) raising fresh equity, so this is a complete red herring.
The crux remains this - is BOO now ex-growth, which the market clearly seems to think it is, judging by the massive fall in market cap. I think that's clearly wrong, hence why I'm bullish on the share at this price. I wouldn't be bullish if it was still around the 300p level, given the poor performance in EU & USA.
Having slept on it, I'm seeing this as a buying opportunity. What's the downside now? Maybe a spike down further, who knows, but there's all the growth coming through from new brands (esp. Debenhams.com which is gearing up for a massive product range, including big brand beauty products - a lucrative new sector).
Hence I see 2022 as being the year when the rating should/could go up again, as growth accelerates. Hence this year's pain could be a 100%+ gain in 2022 in my opinion, hence why I bought more yesterday, and will probably buy more today.
The short term emotional pain is best put to one side as quickly as possible. Decisions have to be rational, and I remember at the bottom of the market in March 2020, when everyone was super-bearish, the bargains that I was able to buy at the low then turned into multibaggers within a year.
Is BOO a broken business? Absolutely not in my opinion. Other opinions exist though, that's what makes a market. BOO is pretty much the only decently profitable player in its sector. I'm thinking of selling my (small) position in Asos (LON:ASC) though. If the sector leader is struggling, then we can be pretty sure Asos will be as well. And it doesn't make much of a profit margin to start with.
Sorry again to everyone that BOO has been such a dog this year, I feel very bad about the losses we've all incurred (on paper), as we're trying to help each other make money here, not lose it. I never imagined that we would encounter these problems, but there we go, these things happen. We can only base our decisions on the facts & figures at the time, and then how the future unfolds is unpredictable.
Regards, Paul.
Try not to feel bad Paul. We are all adults.
I think Boohoo (LON:BOO) will come good at some stage but I also think it will drop further. There is very little support about now so who knows what level it could drop too. The only support about is at the 85 area.
the reason I see it dropping a bit more is we know the ye results will miss the targets. Yes you could argue that this is priced in now, but from my experience it always drops more on the results after profit warnings.
In hindsight, everyone should of followed the rules and sold on the first profits warning. Will there now be a third?
Anyway, time to switch off for me and enjoy this Cotswold hotel before I move on and party over the weekend. Have a good weekend everyone.
Agreed Paul and bought yet more today at 100. My average price per share is now down to 131 which I am more than happy with .
At this share price is there a risk that the company is bought out by Private Equity?
To me, this is starting to look really cheap, holds cash, no debt, c£117m to £130m ebitda, top line growing, profit wobble but high investments to make the future higher profits. Its just their not growing as fast as they were, but shops have been re opened post lockdowns. Also feel the government warnings to not party will impact Boo less people will be dressing up to go out, peraphs. Having said all off that im nursing a big loss on this one.
Given the cash-hungry, capital intensive nature of Boohoo (LON:BOO) currently, I don't think it make sense to consider the valuation of this company on an ebitDa basis.
After all, the depreciation charge in the current year will likely rise sharply to be in the £25-35million range, & will inevitably move sharply higher in the following years as they pour money into opening up distribution centre(s) in the US (+ maybe in Australia & Europe also).
Agree distributions centres will cost a lot in capex but they are needed if they want to crack the market and make it harder for competitors to disrupt and should in the long run improve GP and once initial investment is made should be good for say 5 / 10 years
I would agree, local distribution centres are essential when selling fast fashion.
What puzzles me is the length of time it has taken Boohoo (LON:BOO) to make this decision with regards the US. The company began disclosing the scale of US sales with the Feb 2017 numbers. They then acquired NastyGal to scale up US exposure. Yet five years later they continue to ship from the UK with current delivery times of 6-7 days. Puzzling.
Interestingly, they noted today that "our first US distribution centre expected to go live in 2023". No mention of how many in total they expect to build. Or at what cost?
Im not an accountant, so not fully versed in what's included/excluded in ebitda, also get why ebitda is not a good measure of some buiness that have heavy capex spend, leased property, or heavy debt ect but why would ebitda not be a good measure of this buiness with no debt, little in property, equipment costs? save for distribution centers and acquisitions of brands?
... perhaps because it needs to find a pile of cash to fund the essential investment that it has so far failed to make in its distribution infrsatructure ... ?
Re Boohoo (LON:BOO) - Interesting to see if they act like a 'grown up' big corporate when results roll round. Real test of whether its still an owner led growth start up at heart
Truthfully, we need some more colour than the trading update gives on
i) UK contribution from Debenhams/new brands - are these flying or dying since this lets us see how the base business is doing and understand investments made. (Old school BOO hated sharing info, corporate BOO should if it wants to get investors back onside
ii) perceived market share by country/region - is the Shein story reality or myth and how secure is it. Unlike capital markets where you can lose money to buy share you can then hope to retain, fashion has no such 'buyable moat'; Shein might therefore self destruct or price up suddenly if China tightens lending conditions post Evergrande. The relative competitive strength is the critical insight for me - that I see dimly.
They clearly have got 'unlucky' with the UK only dispatch strategy. It avoided early use of capital but has been a disaster with air freight costs going through the roof; but as said by others difficult to have seen that coming. I would have thought expediting a US warehouse makes sense (unless they see no future in the US which is not consistent with the £5Bn ambition restatement.
I 5 bagged from 25p, sold out - re-entered several years later but am now well underwater on my latest purchase - but inclined to buy more at this price since the fundamentals vs price still seems good on a 2-3 yr basis .
Trying to find the bottom is a pain in the backside! That's why stopped ages ago. I've found that for every bottom I managed to get right, I would get ten wrong. The odds of a coin flip are better. Nowadays I play it safe and look for an entry near the bottom, on a confirmed reversal which hasnt appeared yet.
I prefer trading commodity stocks to retail, but the chart patterns here are always interesting to see as they are occur time and time again in many charts. First the gap down in September was a big warning, and than another warning appeared from a failed double bottom, a month later. The big drop today may entice some, but the price could easily still fall another 10,20... percent from here.
Also, looking at the fundamentals, a StockRank of 36 is nothing to get excited about.
Boohoo (LON:BOO) - given their investment program I can see a potential funding squeeze coming unless the current trading is truly transient. Cash outflow of over £70m in Q3 when compared to end of H1 position. Returns due to high mix of dresses seems a bit of an excuse but anyway in H1 they had inventory build too and it looks like the case in Q3 as well - so that’s a potential write off (earnings not cash) but then there is an element of payables against that that does lead to cash outflow too. If they report poor Q4 then they may have to ‘strategically review’ their capital expenditure (£172m H1 - US warehouse and UK investments related to Debs although does include Soho office of c.£70m) - and/or their marketing spend.
This is my drive by banalysis - I'm not well informed on company. I see the price crunch/inflexion point as a few months away and the near term is likely pricing on fumes. Cash and investment pressures/changes could take the price lower…positive Q4 and cash plumping during quarter could see a nice rise and make the base people see. There's a chance that Boo want to raise some more cash off a low price...
I don't know what the multiple is going to net out at now. Will be high on reported e for fy22. With adjustments and assuming price down 15% from today's open then forecast p/e going to be high teens to twenty area? That's not cheap if there is viewed to be a sales growth or strategic hiatus at Boohoo (LON:BOO)
I wrote this speculative piece on what problems could be at Boo 11 months ago. Its off beam in places but I think the questioning of strategy and direction and the potential red flags they represent still holds up today ->
https://www.stockopedia.com/co...
So adjusting Boohoo's forward earnings down by 15% we get a base case of 12x forward earnings, compared to a range of 20-34 from Asos (LON:ASC) , Ted Baker (LON:TED) and Revolution Beauty (LON:REVB) . The business is still making significant strides in the UK and as seen in the first wave of the pandemic Boohoo (LON:BOO) has profited from the closure of retail outlets. A US distribution centre in 2023 is a light at the end of the tunnel also for distribution issues there in a market where Boohoo (LON:BOO) could make significant strides and certainly overtake the UK in terms of sales.
Even if we use Asos (LON:ASC) 20x forward P/E that's a target price of around 190p in the short term, which sounds about right given the significant uncertainty around freight costs and global inflation. Having bought in around 25p I'm fortunately still very much in the green having also sliced some of my position around 260p last year but I think the price right now is too attractive to not increase my position again.
This share won’t trade at 20x for the foreseeable future. It’s debatable whether it’s actually a growth stock now and there will be a huge discount due to a total lack of trust in management. I reckon they will achieve EPS of 5p this year and a multiple of 15x seems more appropriate. The stock has a lot further to fall
Boohoo (LON:BOO) all very predictable like you say. One thing I've mentioned a few times is that shein seems to be out competing boohoos brands on every level internationally. Their more local moat seems to be around brand recognition and speed of delivery nationally in the UK.
Reading the above summary of the analyst call it seems that the previously announced US DC is not yet certain. This is a worry to me as I think it will be necessary to derisk the business access to the US.
In spite of the above boohoo is still growing revenue. I'd envision the 1yr lfls are possibly late single digits in the UK adjusting out the additional revenue provided by new brands. Internstional lfls are likely negative assuming some of the US growth is bolstered by the new brands. The investment case centres around these metrics for me. If boo can stabilise international revenue then I think it would be a good buy at these levels. The 2year growth story does paint a better picture but let's face it 2yrs ago was pre-tiktock and shein wasn't the threat it is now.
Boohoo (LON:BOO) (no position)
Posting the below table for any interested.
What I found curious was that I've never seen a Q3 (Sep-Nov) update before . The company always does a P7-P10 update, which includes December. It's a shame as many of the Like-for-Like numbers published today therefore don't mean very much to me.
A few others personal observations:
I believe the bulk of this spend has gone into strengthening its UK distribution centre and IT system infrastructure. I don't recall there being any acquisitions this year.
If the company follows the trajectory of Asos then I imagine capex being significant for many years to come.
On the cash you are missing the fact they acquired the new office for £72m in Soho in April. Been there & a cracking location to attract staff to drive future growth. That’s a big reason for change in the cash
Michael, I don't understand the Rockrose Energy (LON:RRE) bit as it reads in Stocko as being suspended from trading, and for more than one year now. I held £RRE until the take-over was completed and was paid out on the 18th of September 2020.
Hi
The Red Electrica (LON:REE) comment was an aside and relevant to the rest of the comment so I have removed it now.
Regards
Michael
Glad I sold this dog after the last profit warning. Not sure if this is the second or third warning this year but if you get two it’s almost a certainty that there will be a third. This business, in my view, is already past it’s peak.
Management are full of excuses and always claim that the issues are “one off” in nature. For 2 years now it’s been one disaster after another always with the claim that the problems are transient. To all remaining holders of BOO I would advise you to sell now. With sales outside the UK falling between 12% and 21% it seems this business is in real trouble and there’s no credible plan to fix it.
A third profit warning is almost guaranteed, seeing e-commerces platforms blaming the pandemic for poor performance sounds ridiculous. Next, they will be blaming reopened shops allow to trade as a problem. Ultimately this is a company that has no pricing power or control of its costs. This is going to get worst before it gets better.
The cheerleading and groupthink on this thread just confirm why markets are not efficient and can persist for a long time
But as always DYOR.
BSV
Sure, "poor peformance". Only 16% growth this year and 65% over two years.
Absolutely dire.
It is very poor performance relative to the expected performance that underpinned the share price, hence the share price has now cratered.
I do think you should consider whether you have an emotional attachment to this share that is getting in the way of you assessing it objectively.
I agree with statement one.
As for statement two, I've looked at what I think is going to happen over the next five years, I've allocated a fixed amount that I'm about 3/4 of the way through that I am prepared to write to zero.
Every 10-15p drop is a buying opportunity for me. Grabbed another load at 116 this morning. Looking forward to seeing the institutional holdings in this increase and the shorts unwinding at some point.
16% growth is poor when you consider that they have bought 4 or 5 new brands. LFL sales are therefore probably negative but typically management don’t give us the information to determine this.
How much did they pay for those brands?
What's the rest of the UK clothing market doing?
How are they supposed to control the problem with international freight capacity plummeting?
I have two queries.
Shein. I have little knowledge about this and the effects in this trading area, this fashion area and the key geographical areas. Certainly £ASOS has not been shining either. Shein is presumably suffering the same logistical issues as Boohoo (LON:BOO) and £ASOS so is Shein really having a longer term underlying impact on Boohoo (LON:BOO) and £ASOS which is hidden by these 'temporary issues'?
The US figures are dire, and the 2023 distribution centre opening is totally unacceptable, and frankly unbelievably slow - but what do I know about the logistical implications? The US is such a key growth element in the Boohoo (LON:BOO) story over the last 2 years and going forward that it has to be solved. Is there still some holding back because of the recent legal issues, do we think?
Sorry, no answers, but just trying to go a little deeper than the top line figures.
Thank you for the reader's forbearance.
"Sorry again for the pain we're all feeling in the short term. It happens. Nobody can predict the future accurately. All we can go on is the facts & figures available at the time, anything beyond that is just guesswork."
Paul
IMHO you have no need to apologise . All Stocko subscribers should be aware that what you and Jack do are not tips but ideas. Even if some do take them as tips and invest accordingly, which i am sure many have (myself included ) then given time and average luck then the result would probably be positive.
Regards
Richard
I just listened to the analyst call - after a long delay to get in, but the CEO was reading the RNS, so I didn't miss anything important. Some key points I jotted down -
Gained significant market share in pandemic
Sharp increase in returns rate, now starting to moderate
Big miss is international sales - Europe & USA. Grew in Oct, flattened in Nov, down in Dec are covid restrictions increase - some correlation with lockdowns, but volatile
"Our delivery proposition internationally is not good enough" (CEO) - 10 days in USA, 7-8 days in EU. Too long for a fashion business, as customers order product & want it for the weekend. "exploring all options" for distribution centres in USA (2023) & EU (after) - international growth is a focus
Freight/carriage rates still high, going up if anything
Marketing spend being maintained - guidance is 11.5% of revenue this year - spending up to point of diminishing returns
Quality/pricing issues? No, not an issue
Cost of despatches to USA was £6/parcel, now more than doubled. Due to air freight costs, which should reduce as transatlantic flights resume. Ultimate solution is US distribution centre planned for 2023
Overall - I'll stick my neck out here, and guess that we might have put in a floor with this morning's spike down.
The problems are all predictable, known factors, with good upside as these supply chain issues eventually ease, which they will do - we just don't know when. Omicron probably pushes the timing out by a few months, but could also be the solution, with proper herd immunity gained maybe from a higly contagious, but less deadly strain? Who knows.
I'm staggered that the share price has plunged this low, which provides a nice opportunity for recovery in my opinion. I'm trying not to look at my P&L on this one, because for me it's all about holding long-term, as I think it's a great business.
Sorry again for the pain we're all feeling in the short term. It happens. Nobody can predict the future accurately. All we can go on is the facts & figures available at the time, anything beyond that is just guesswork.
Regards, Paul.
Thanks for analyst call summary. Will catch up with recording this weekend. I like the style of this update; agreeing the US / EU customer delivery is not up to scratch. Honesty re freight rates (my take on this is suppressed customer demand in lots of co’s we see will also “help” to soften this. Maybe another year of this? I think some are valuing this on a loss making growth co, or mature ex growth. It is neither imho. No reason to believe it cant do 20% pa growth LT. I am a LT holder too but no fear this is in play for a takeover - a cheeky sub 300p bid might do it? PS please dont apologise for the pain. You do a great job highlighting ideas. It’s me who hits the buy button!
Note on Research Tree now entitled Headwinds Persist. I have to work now so can't go into depth at this second. Look at the RT communication. I hold.
Looking back, I think there was always going to be a crunch with the UK only distribution centres. I believe management had a credible plan to resolve this (as opposed to those on this thread that claim they didn't) but the pandemic overtook events and has left them a bit high and dry in that regard.
I find it interesting someone below in the thread mentioned that a news article claimed Primark is the only company that can compete on price, when we have the former Primark leader running us here. Bizarre. Oh well.
I'm still buying all the way down, nothing in today's narrative either RNS or Paul's comments about the call (thanks Paul) changes the long term story here.
If you believe the company is at its peak then sure, these are expensive, but even if you think they're capable of growing at "only" 10% for the next three years, these are ridiculously cheap.
One small point on Paul's comment that air freight costs should reduce as transatlantic flights resume.
A major influence in higher air freight costs is the increased demand from ocean shippers who have time sensitive products that used to be shipped by sea. To avoid a total loss a lot of these shippers switched to air freight giving lower profits, or more likely, lower losses.
The unprecedented chaos and delays in container shipping (a fascinating story) will not IMHO be resolved in the near future i.e. not at least until 2H 2022 , (assuming a decline in the Covid dislocation) at the earliest and therefore competition for and demand for air freight space will probably be high.
Anyone interested in an interesting and possibly profitable situation should examine the container shipping industry, charter rates for container ships, costs (now 5x pre pandemic rates ) for shipping a container from eg China to the East coast or West coast of the USA etc) and what has happened this year. (Disclosure: I have holdings in three container shipowners - all USA quoted but not USA based)
Obviously this bonanza situation will decline over time - the question is the time period. The container shipping industry has gone through a very hard 10 year period with declining capacity and cut throat competition.
Now this has all changed: the main/largest players have combined into 3 associations that allegedly control 80% of the international container shipping trade and H1 2021 has shown them paradise: several players have made more profits in H1 2021 alone than the net profits less losses over the last 10 years. Unbelievable !
A word of caution - the low PE in their share prices you see is a reflection of peak rates and consequent profits in time of crisis where customers are desperate - they should be treated with caution.
As always DYOR.
The other day I did look at freight costs for China to UK and I was very surprised that Air freight was not even 2x freight by ship. That was for 200kg package. Filling large containers would reduce the costs somewhat. But certainly for smaller packages then air is a real option. Costs off hand were around $600 by ship and $1,120 by air, of course by air is so much quicker.
bought a load more at 116. Will be seen as an absolute steal in a year or so