Short Boohoo?

5th Jul '20 by Momoko Miyamoto

33 comments 2190 reads

Boohoo (LON:BOO) suppliers in Leicester and East Midlands under the spotlight for illegal and unsafe working conditions - contributing to coronavirus spread. Surely their margins and/or business model is unsustainable.

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33 comments

JohnEustace

6th Jul '20

You might want to read this post on FT Alphaville.

https://ftalphaville.ft.com/2020/07/06/1594028037000/Markets-Now---Monday-6th-July-2020/

Some interesting links such as Standard Life explaining in March why BOO is a core holding in their UK ethical funds. I'm not sure how well that will age.

https://www.aberdeenstandard.com/en/asieurope/insights-thinking-aloud/article-page/boohoo-v2

Hydro31

7th Jul '20

an example of how BOO management don’t sit on their hands. It’s not long ago BOO was under the spotlight as a contributor to plastic / fast fashion environmental crisis. But they turn it round, invest in it and gain support from environmental funds?! I wonder if they will do similar with this, perhaps an excuse to charge more by ensuring ethical purchasing and bolster their margins.

Caper4

7th Jul '20

Have bought some more at 267 today. Let’s see who is correct on this

PalmJum110

7th Jul '20

never catch a falling knife.

Wilkonz

7th Jul '20

Never catch a falling knife.

My thoughts exactly.

And ignore the dead cat bounce that will happen tomorrow or the day after.

Spl183

7th Jul '20

Hi Guys,

Thanks for the post; prompted me to short the shares yesterday AM for a nominal profit (i.e. a few beer tokens for when I get to taste a draught beer again some time very soon ...).

Whilst I do think there has been an overreaction following today's continued fall ... equally, not convinced this has been fully played out as yet. If it appears that BOO were indeed aware of the exploitation practices (frankly, cynic in me feels it doesn't take a genius to figure out how supplier costs could be reduced to meet the very low price BOO pays for these garments whilst suppliers remain viable ...), there could be wider ESG/ repetitional issues for some insti's here. In addition to more bad publicity for BOO. Exacerbated by current BAME equality sentiments/ CVD-19 second waves.

Some people like to see a giant's fall from grace; the half glass empty/ too good to be true types ... jumping on moral bandwagons, etc. Whilst I am interested in going long at some point, will elect to hang fire a few more days - time will tell if that's a bad move or otherwise ...

Whatever your execution plan is - good luck to the Poster / Contributors !

Safe regards
Spl183

Wilkonz

8th Jul '20

Next, Zalando and Amazon are breaking their connections with Boohoo (LON:BOO), and I believe ASOS too. This indicates a further fall in share price, at least in the short term.

Caper4

8th Jul '20

john652

8th Jul '20

So either i am slightly depressed that when a company is accused of something that they are guilty until proven innocent or, i am slightly cynical of the likes of Next and what they want to achieve and drive sales of own products and damage a competitor. Quite clearly the reputation damage to Boohoo (LON:BOO) is to be huge:

‘Next is not pre-judging the outcome of this process and no final decision has been made, however, while there is a case to answer, these labels will remain suspended from all Next websites," the spokesman said.

Bullsnbears

8th Jul '20

Does not the Sunday Times have a case to answer here? Would like to see Boohoo pursue them for damages.

Jay Pollard

8th Jul '20

............. unless you're willing to break the knife's fall with your foot..

Spl183

8th Jul '20

Hi,

If Boohoo can prove unequivocally, and beyond reasonable doubt, that they had absolutely no idea as to how they were able to pay for garments, produced domestically, at such low prices (and in turn achieve the margins to date) ... then such action could be vindicated.

But I for one remain highly skeptical .... the main principal behind BOO apparently was a former local wholesaler, and if you read the auction type format in which BOO were able to pay such low prices for garments locally, I personally struggle to see how they weren't exploiting these local practises (indirectly...).

simoan

8th Jul '20

I think Next are being disingenuous to be honest. They are in the same line of business, and as it so happens, have their headquarters in Leicester. It would be quite remarkable if they didn't know these type of sweatshops existed right under their noses and that Boohoo manufactured in Leicester.

All the best, Si

Momoko Miyamoto

26th Mar '21

As some others on the stockochat have pointed out, ditching the Leicester sweatshop suppliers and relying on imports removes much of Boohoo's advantage over rivals. Starting up an in house UK manufacturing operation in full compliance with UK employment laws (and under media scrutiny) will gobble up profit margins.

Brexit has gummed up exports to EU.

Hedge funds have started short positions too. Given the punchy earnings multiple I reckon the risks of staying long have gone up considerably.

slopsjon

26th Mar '21

Shorts Two shorts at the moment

Tin1

28th Mar '21

Under the FCA list*, only a total of 1.08% of Boohoo (LON:BOO) issued share capital is being shorted. Shorts are held by Lansdowne Partners (UK) & LLP Marshall Wace LLP, who are hedge funds. As others have said, v. small positions and likely to afford any long strategy held in BOO. Otherwise, if the intent was to push BOO down they would need bigger positions.

*https://www.fca.org.uk/markets...

chillyhill1

28th Mar '21

If my memory serves me correctly I think Paul Scott was of the opinion that this would increase margins as products from Bangladesh etc will be cheaper than UK produced products. Although, they will lose the speed in producing test samples to test the market

Momoko Miyamoto

1st Oct '21

Surely given recent developments, rising costs and consumer headwinds Boohoo (LON:BOO) no longer merits its previous valuation. Further derating likely in my opinion.

Bluesky Ventura

1st Oct '21

I see there are still a lot of commentators trying to put lipstick on a pig, to provide a positive spin to a profit warning.

Most worrying they are splash out CAPEX like it's going out of fashion, I'll just adjust my model and would not invest unit the price reach the blue and red line. I take out a small short as the numbers look bad for the next few years, and profit warnings tend to come in three's.

As always DYOR.

BSV

Forbsy

1st Oct '21

I didn't short but happy I bailed on the long re-entry i'd made on the 21 Sep after the reversal failed to follow through . Happy to be out with small loss of ~5% on the trade.

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Momoko Miyamoto

33 comments

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