BooHoo (BOO) Property Acquisitions
Boohoo (LON:BOO)
(I hold)
Announcement today (13 April 2021).
This looks interesting. BOO has bought an office block in Soho -
boohoo, a leading online fashion retailer, is pleased to announce that it has acquired, for £72 million, a new office in Soho, the heart of London's West End, for the Group's London-based brands. Since acquiring the Karen Millen and Coast brands in 2019, the Group's presence in London has grown significantly through organic means and more recently through the acquisitions of the Oasis, Warehouse, Debenhams, Dorothy Perkins, Burton and Wallis brands. The new office is intended to become home for all London-based product, marketing, technology and central support teams, offering flexible working for approximately 600 of our colleagues.
The Evening Standard gives more details on the Soho office deal -
- 10 Great Pulteney Street
- 46,000 sq.ft.
I’ve googled it, and the building BOO has bought (freehold - I've just confirmed this with the company) is currently called Nokia House. It’s within walking distance of the main garment area (which is a little further north, clustered around Great Titchfield Street). Soho is a much more interesting place to work though, full of interesting bars & restaurants, so with flexible working being offered as well, then I think BOO will have no trouble attracting the best creative talent to work in this new Soho office.
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This comes hot on the heels of a “transformative” deal to acquire a large “state of the art” 1.2 m warehouse in Daventry, which was completed in 2019 for former owner, Arcadia group (since gone bust, and broken up). This warehouse deal enables BOO to increase capacity to £4bn of sales, more than double forecast £1.7bn revenues for FY 02/2021.
My opinion - these property deals demonstrate how serious BOO is about major expansion, not just organic, but also from all the new brands acquired. The former Arcadia brands, and Debenhams, already had significant online sales. With BOO group expertise, and a total focus on online only, I think we could see a major increase in revenues & profits, looking forwards say 2 years, once the new brands have been assimilated.
It’s very exciting, and the current forward PER of 32 really doesn’t reflect the massive expansion in the pipeline from all these new brands (it’s now 15 brands in total), in my opinion.
Hopefully ESG concerns might be a distant memory in a year or two, although never underestimate the power of the press to keep regurgitating the same story! I think anyone likely to sell on ESG concerns, is almost certainly out by now. Once they see the growth, and the higher standards being implemented on ESG, then maybe some of those sellers will be buying back in at a later date, and a higher price? ESG funds should engage with companies where there are concerns, not just walk away - how is that meant to help things improve?
There’s nothing particularly bad about the garment sector. People need clothes, they gradually turn into fluff on a tumble dryer's filter, so need to be replaced. Young people in particular want the latest looks, and why shouldn’t they? BOO garments are not the cheapest on the market, and are not designed to be worn once, that's a fallacy. I do think the group needs a better PR team, as so many of the hostile press articles are based on flawed opinions - e.g. if you watch the parliamentary committee which questioned BOO management, this came through.
In my view this share is the ultimate coffee can share - it's my biggest personal portfolio holding, and I intend holding forever. It's already more than 10-bagged from the lows a few years ago, and I think the almost infinitely scalable business model, combined with incredibly hard-working and ambitious management with plenty of skin in the game, should be a winning formula for investors. Could it 10-bag again from here, to make a >100 bagger in total? Yes, I think so, taking a say 10-15 year view.
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20 comments
I read the Times article listed above. The point being fast fashion is a waste of resources and people will change their ways when public perception shifts.
Unfortunately environmental heavy consumer activity exists in many areas. Take a look at the big SUV cars on the roads with one occupant. People like driving around in a large cabin, high up from the road.
I've seen the fast fashion purchasing activity myself. Essentially, young people on their phones scrolling through options and purchasing a couple of items. Then, go out wearing the new gears, taking photos and posting on social media. If the pics are good, the likes roll in. Thing is, once posted, you don't want to post next week wearing the same clothes. So back on the phone to find a new outfit, for next weekend's posts.
Ultimately the solution is more of a rental - recycle model. Buy clothes, wear a few times, send back for a partial credit, something like that. No idea if this is economically feasible.
In the meantime, I suspect the fast fashion industry will continue, given other industries with the same sort of issues, e.g. cars, food industry, etc haven't seen much change other than in niche product offerings.
Clearly the name "Boohoo" has, unfairly, acquired a negative reputation in certain circles, so to avoid it tainting the other brands and taking advantage of the much larger portfolio, wouldn't it make sense now to change the top company name and keep Boohoo as just one of the fashion brands? I think Paul says the management are an extremely serious group, so I would suggest "ESG Fashions".
100% makes sense to drop the rather childish Boohoo name. Not so sure about ESG Fashions though!
I’m not normally a fan of changing company name. In this instance though Boohoo (LON:BOO) is already undergoing / has undergone massive change:
* single brand to multiple brands
* teenager / young women’s clothing to clothing for both sexes (and most of the 106 genders) and for a much wider age range
* retailing grooming / beauty products (resulting in more boohoo brands as well?)
* retailing household goods
* from a small cap business to being just £200m short of FTSE 100 scale market cap
* from edgy market stall / Leicester rag trade culture to mainstream ESG culture.(..but hopefully still a bit edgy)
In that context a more grown up name that reflects the Group rather than just its first brand may be beneficial, though perhaps give it another year to really get through the ESG legacy issues. I guess in that context changing Group name to Debenhams will be an option.
I am confused. I thought we were having one BooHoo discussion thread on Stockopedia to which we would all add/contribute to over time. So all information in one place in this thread which had been already set up. : https://www.stockopedia.com/co... In stead Paul has started a new thread.
Hi Fegger, this is what happened about a single thread vs. multiple threads:
Fair enough. Will have to hope that the tagging works! Still would have preferred one thread as seems to have worked reasonably well for other companies
@paulscott - you talk to mgt at Boohoo (LON:BOO) ! Tell them they need to shout about sustainably branded ranges. They are walking the talk. But ironically, we need more talk from them. Not just action!!!
There probably will be an arc of sorts that will tail off the growth of online businesses, and clothing retailers. But very hard to predict how this will progress.
I guess like foods there may be quirky 'grown locally' type brands, with sourcing information attached. If Boohoo (LON:BOO) management can model things like this into profile they may serve to salve the consciences of those looking to have price points, fashion, and ethical concerns all wrapped up in one (journalist types are usually pseudo socialists at the young end of the profession, and like to feel good themselves by painting others as 'bad', especially as this is the USP of news media)
But that means getting ahead of the curve rather than being reactive. Being cynical it is about getting the consumer to relax when they see something they want to buy.
I read the Times article too, was expecting them to mention Boohoo (LON:BOO) and was surprised when they didn't.
Watching this company is like some sort of mass psychological experiment. It's well understood that 'some people' are concerned about the environment and fast fashion etc and there is no doubt a niche market for companies that will cater for this market to spring up and do well in.
The question really is how big is the market that is left, full of those who may pretend to care about this sort of thing until they need a new outfit, and those that don't care at all.
A few years ago all the negative comment on fashion retailers was about how high their margins were for a simple T-Shirt with a logo on it, now they're getting hammered for selling stuff too cheap, can't win as far as the media goes but the public vote with their purses / wallets.
The other part they mention about 'embarrassment' is reduced quite a bit by all the brand diversification too. If Boohoo (LON:BOO) does become unfashionable for people to buy from they might just switch to PLT, I wonder who owns them?!
FWLIW, here's a link to the Times article mentioned in earlier posts. Not sure I would give any credence to it.
"Why fast fashion could be set for go-slow"
https://www.thetimes.co.uk/article/276216e2-9bb3-11eb-8da6-6f8eecc82ac3?shareToken=3cc96594ac291cc3fc314574d09c37b1
Disposable fashion is about price and income. Low enough price that you are not to bothered about disposing of it and income that you can keep buying new items. How does a company position itself away from disposable fashion without price increases? There will always be bargain hunters and always bargain providers. There is also low income customers, who are not part of the disposable fashion habit, who appreciate low prices. So it's got to be people who change their habits to get rid of disposable fashion. We have a tax on plastic bags but could we have a tax on clothing (we already have one, vat).
Thanks Paul. I 100% agree with you on this company. Have owned it for quite some time and continue to buy on weakness. It now represents by far my biggest holding and it is certainly a keeper.
This shows real ambition. Good to have BOO as a separate thread. IMO the history of the discussions are just as important as the latest bit of news and this will make it easy to access and give BOO a home.
I take this as positive news - hopefully its an indication that they are serious about trying to keep the brand names acquired "intact". They have had a poor start in that regard so lets hope they do less of a Mike Ashely and more of what we would expect from the brands they have bought.
Practicably speaking splashing the cash and buying rather than leasing should help minimise ongoing costs that will drop to the bottom line. I have never had any concerns about boohoo's balance sheet - so the funding really should not be an issue.
I have only recently bought back in - one day or two before the sky slavery story , so nice to see that there is some semi positive news at last. I wish this had been a coffee can holding for me as i sold at 125p and bought back in at 330p - so i have had to come back here with my tail between my legs somewhat. To be fair to myself i didn't have any certainty boohoo would on push on as quickly and as well as they have done after i sold out and i also had slight concerns about the PLT ownership structure - at the time boohoo was alos very overweight in my portfolio. Would i have have bought back after the slavery story ??- perhaps not immediately but i have made the decision to hold on as on the balance of probabilities that the story is practicably speaking hopefully pimped up fluff that hopefully has little substance or has issues that were "third party related " and are now not present and have been addressed. Yes if an independent company alleges slavery then the authorities would have to look at the "facts presented to them" - so i can easily see how this fact could be somewhat pimped up to make a nice little story.
Just thought I would mention the ridiculous queues for the high street version of boohoo I.e. Primark ( aka pri-mani) in Kingston yesterday. Mostly teenage girls. I very much doubt they care about ESG or know what that means. On the flip side I asked my wife if she would work for boohoo in Soho and she said "no they are a bad company"
I asked my wife if she would work for boohoo in Soho and she said "no they are a bad company"
Ask her if she would work in Soho for Oasis, Warehouse, Dorothy Perkins, or Debenhams.
Interesting article in today's Times highlighting UBS analyst note - basically saying that fast fashion could become increasingly toxic/ socially unacceptable, similarly to plastic. They say a shift away from disposable fashion could lead to a 10-30% fall in sales. It specifically mentions Primark as being worst positioned, while H&M as best positioned (early mover in sustainability). Doesn't mention Boohoo.
Young people do not care about ethics.
If they did, there would not be litter, bottles, cans, exhaust noise, car crashes.
Lowest common denominator wins.
Hi Paul,
Thanks for the write-up, very helpful. What do you think about the use of capital to buy the freehold vs. using it to acquire other businesses or invest in the existing business?
With an ROE of c.26%, using capital to buy freehold, which may save them paying rent of 4-5% of the value (a guess) doesn't appear to be an optimal use of the cash. Although I don't know exactly how they financed it. However, I know having freehold property on the balance sheet does reduce risk.
Thanks,