Cry-i-i-i-iiing over boo

Wednesday, Jun 13 2018 by

I know that Boohoo.Com (LON:BOO) is a favourite of many on here and expected there to be a bit more chat on it after Q1 2019 update which I was looking forward to for my own enlightenment.

I sold my Boohoo.Com (LON:BOO) shares on this announcement at 216p. I'd bought in for the first time late 2017 between 170p & 180p. A measly 20% ish gain. No boo multi-bagging glory for me. A really impressive business and I was very late to it compared to many buying in the 50x forward PE area whereas other got in lower price and lower PE.

This is not my usual buy territory as I like a bit more value and/or contrariness to buy candidates (I do like some growth and willing to pay up a bit but I'm defo slightly to the cheap and miserly side). Just the way I'm wired. I can irritate myself sometimes with a lack of willingness to pay too much for growth. Boo had pulled back on some worries after a stellar FY2017 and I felt an opp to get into a stellar grower at a high but not too high price.

FY 2018 performance was very impressive particularly top line growth at 97%. Conversion to profits less impressive at 29% net profit and 26% eps. This is where the trouble starts for me...

I was willing to overlook last year's lack of follow through to profits with new acquisitions, the cost of rapid growth and infrastructure build out. However, Pretty Little Thing acquisition had irritated me a little as 1/3rd of value stays with founders (siblings of boo founder). Obvs PLT has made stellar first year contribution and spectacular Q1 2019, BUT...

The main brand stagnated a bit by comparison in FY 2018 relative to PLT but not absolute terms where it was still smoking relative to competition so that was okay overall. However, the Q1 boo brand result is a flop. IMO there is a lot to understand about this flop relative to PLT and we don't really at the moment.

Boohoo man was pushed at end of financial year as standalone brand but they have not split it out in Q1. That seems a bit odd to me.…

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Boohoo Group PLC, formerly plc, is an online fashion retail group. The Company is based in the United Kingdom and has a strong presence in the United Kingdom, the United States, Europe and Australia, selling products to almost every country in the world. The Company owns the boohoo, boohooMAN, PrettyLittleThing and Nasty Gal brands. These brands design, source, market and sell clothing, shoes, accessories and beauty products targeted at 16-30 year old consumers in the United Kingdom and internationally. more »

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22 Posts on this Thread show/hide all

Damian Cannon 13th Jun '18 3 of 22

Thanks for outlining your thoughts Paul. They are pretty much in line with my own feelings about the update - especially around PLT. The business seem to be pushing this brand hard, which is great, but they're either neglecting the core boohoo brand or growth there has permanently stalled.

I still believe that this is a great business, which will prosper and grow, but it's hard to square the high P/E with a group that isn't firing on all fronts. As a result I'm not about to sell out of Boohoo.Com (LON:BOO) but neither am I inclined to top-up until they come out with an above-expectations announcement.

Blog: Ambling Randomly
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Laughton 13th Jun '18 4 of 22

No, I can't see Amazon buying either. Maybe another clothing retailer who thinks they have the necessary flair but Boohoo.Com (LON:BOO), to me, depends to a great extent on the people at the top. There's a lot of artistic input in the design side, lots of style changes going on almost daily to keep everything very fresh and a lot of social media and tie ins with celebrities/influencers to generate/maintain interest from their customers.

Amazon, by contrast sells a massive range of stuff that other people design/manufacture. There's nothing there that's original, it's just a huge marketplace where you can get anything you want at a rock bottom price delivered to your door the next day with virtually no hassle.

To buy somthing like Boohoo.Com (LON:BOO) they'd have to take on the people at the top and, even forgetting that those people would sudeenly become very cash rich, I can't see them being interested in working for someone else with all the oversight that would entail. They'd much more likely want to go off and start up again, work for themselves and prove that they can do it again their way.

The huge outperformace of PLT vs BOO is a bit of a worry though. I guess it's human nature that, given the choice/chance, management are going to push the side where they personally own 1/3rd of the profit harder than the other side where they have a much smaller shareholding. As Paul intimates, there's not really that much difference in the product - it's how it's marketed that makes a difference.

This has been a huge winner for me - I first got in near the beginning on Paul Scott's SCVR early write up and haven't sold any but I think I've persuaded myself that I should cut back a bit to a more normal sized holding.

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Banzii 13th Jun '18 5 of 22

In reply to post #373649

In the past couple of years amazon have moved into own brand products including clothing.

I think it's mainly in the US for now but who's to say it will stay that way.

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0ctag0n 13th Jun '18 6 of 22

CFO has just sold 1.5m
"Neil Catto has exercised an option over 1,553,398 Ordinary Shares at an exercise price of 25.75 pence per Ordinary Share, and has sold these shares at a price of 215.093p per Ordinary Share"

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mojomogoz 13th Jun '18 7 of 22

In reply to post #373649

My comment that Amazon may one day think to acquire Boohoo.Com (LON:BOO) has perhaps distracted. My point was really that boo looks a very hard acquisition for anyone particularly at this sort of valuation and with all the investment required to get it to £3bn annual sales with a 25% annual sales growth rate. Who could find synergies with such a global online business and afford the price tag -> Amazon.

It's a blue sky thought rather than a prediction and my underlying implicit point is that boo is going to have to get itself there on its own without help...which means shareholders have got to believe they are getting paid back in company cash flows

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Damian Cannon 13th Jun '18 8 of 22

In reply to post #373674

Yes it's not much of a vote of confidence to exercise and immediately sell all 1.5m shares! His actual holding of shares (rather than additional options) is minuscule. Still nice work if you can get it.

Blog: Ambling Randomly
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gus 1065 13th Jun '18 9 of 22

In reply to post #373709

Similar thing happened last September when joint CEO Carol Kane sold 4.65m shares just after a results announcement that triggered/was contiguous with quite a sharp sell off in the shares (then priced north of 250p and fell below 200p after her sale at 230p). Can’t blame them for cashing in (as a prudent investor doesn’t really make sense to have all of your assets invested in your employer’s equity (just ask former Lehmann Brother’s staff!)) but as you say doesn’t really demonstrate a vote of confidence in the future prospects of the business.


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jonesj 13th Jun '18 10 of 22

I've also just sold out of Boohoo after approximately a 20% gain, although this is my second time around & first time, the sale price was approx 9.5x the purchase price.

I just think the high PE ratio needs to have very strong growth to support it. Whilst the overall growth is good, growth at the core BooHoo brand seems to be slowing rapidly. So one has to question if this is a blip, or a flattening out that will spread to their other brands within 1~2 years. I have difficulty answering that, so sold.

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slc72 13th Jun '18 11 of 22

I sold out today, made a small profit on the rise up over last month, will probably go back in if I see a good trading range appearing. But it isn't something I feel safe just holding long term for now. Maybe if I manage to get some at a good discount and I get lucky I might become more of a long term holder.

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extrader 14th Jun '18 12 of 22

In reply to post #373709

Hi Damian

If you go to the A/R, you'll see Catto's salary is GBP 217.5K.

The shares he's sold relate AIUI to a 2015 ESOP, they vested as follows

Shares : 1,553,398 price 25.75 Vesting period 22/05/15 to 22/05/18.

They were earned on basis of earnings targets over the 3 years. He probably couldn't exercise post 22/5/2018 because of a closed period.

I have no problem with the CFO, one of 3 ED's, making money on a share that has 8-bagged for me...

I would like to see Mahmoud and Carol spending more energy on the core BooHoo line , though...


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andrea34l 14th Jun '18 13 of 22

I sold out too on the trading update. On this valuation they cannot afford for anything to go wrong but, for whatever reasons, the original boohoo brand has seen a distinct slowdown.

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paraic84 23rd Aug '18 14 of 22

Boohoo (LON:BOO) is off quite a lot today. Have I missed any news? I also see some other internet stocks are down (e.g. £MYSL) so I am wondering if Corbyn's comments today about a tax on social media firms have unnerved the market in terms of thinking the Government is under pressure to take more action on online companies. Particularly on the back of Hammond's comments in the FT.

I don't hold Boohoo (LON:BOO) currently as I sold out at 209p and 189p. But I am keeping an eye on whether to go back in.

FYI I think MySale (LON:MYSL) is now looking interesting trading on just 20x 2019 expected earnings.

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vik2001 24th Aug '18 15 of 22

just looked at the charts on this one. support is around the 165p mark, so It should bounce up from here unless the markets cause further selling.

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buz 24th Aug '18 16 of 22

Catto is probably selling now as they are about to go into a closed period because of the results date in Sept.

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millen 24th Aug '18 17 of 22

A poster on advfn cites a broker report talking of a £7-9m exceptional cost from the disruption caused by the warehouse move, but suggests this was already priced in.

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herbie47 24th Aug '18 18 of 22

Also Underperform rating reiterated by Royal Bank of Canada with a 140 price target.

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mojomogoz 24th Aug '18 19 of 22

Interesting comments. As per my initial note I think there is a chance of let down from Boohoo (LON:BOO) - a few hints at growth issues and an approach with PLT that feels a bit dissonant to me. But its an impressive management team so they may very well ride through it relatively unscathed, in which case the price today is good.

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Laughton 24th Aug '18 20 of 22

In reply to post #393459

Isn't this a significant enough matter to have been worthy of an RNS?

I am a shareholder and would have appreciated being informed rather than hearing about it third hand.

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paraic84 25th Aug '18 21 of 22

In reply to post #393494

The Times has now published a story about this. Apparently the company briefed major shareholders on disruption due to the warehouse move for PrettyLittleThing. The impact is between £7-9m but that this is "within previous guidance".

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mojomogoz 25th Aug '18 22 of 22

In reply to post #393669

This sort of differential treatment between small and institutional is infuriating!

It may be within guidance however it remains material and has potential to impact price. So that means the big boys got the chance to sell some of their holding before small guys know the skinny...or if they judge the news to be non material to the long term then they get to understand that they have a better priced buying opportunity if they are positive at the same time that smaller shareholders may be prompted to sell as the price comes down.

The FCA should fix this. This is news that should be on RNS before there is a briefing for major shareholders. And for a company Boo's scale they should allow small shareholders into the meeting (inc Q&A). Via remote conference fine.

I have complained to company management, financial PR and the FCA about this sort of differential treatment in the past.

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