The boohoo (LSE: BOO) share price has been a horror show for years. It spiked to 390p four years ago in September 2020 but now trades at a meagre 29p. That’s a crash of almost 93% and any investor who made a grab for this falling knife will be counting their fingers.
I love buying good companies when they fall out of favour, and boohoo has the merit of a string of top brands, including PrettyLittleThing, Debenhams, Karen Millen, Coast, Dorothy Perkins and Warehouse.
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Yet I always felt the fast fashion pioneer’s shares had flown too high, too fast. When they fell even faster I decided it was best to stand back until the dust settled. boohoo shares are down 12.43% over 12 months. That’s modest, by its crazy standards.
Is this stock a top FTSE recovery play?
Most investors will have wiped their tears and moved on. But I’m wondering whether there’s an opportunity for me in bombed-out boohoo shares.
Pretty much all that could have gone wrong for the group, did go wrong. The cost-of-living crisis didn’t just hammer demand, but drove up the cost of labour and materials too, squeezing boohoo from both sides.
This came on top of its supply chain and greenwashing scandals, which exposed the grubby underbelly of the fast fashion revolution. boohoo claimed it had learned but still can’t get the optics right.
boohoo heir Umar Kamani’s four-day celebrity-packed £20m wedding on the Côte d’Azur ended on 6 May. Four days later, the group announced that 1,000 staff would lose their jobs after full-year revenues fell 17% to £1.5bn, while pre-tax losses climbed 76% to £159.9m.
CEO John Lyttle hailed positive trends in the performance of core brands boohoo, boohooMAN, PrettyLittleThing, Karen Millen and Debenhams, while claiming the group is now well positioned to return to growth.
Then boohoo messed up again. On 28 May, shareholders forced it to backtrack on plans to hand £1m each in bonuses to Lyttle and co-founders Mahmud Kamani and Carol Kane.
For crying out loud!
This is a company that has seen net debt rocket from £6m of net cash in 2023 to £95m of debt. I guess it felt another £3m wouldn’t matter. It reminded me of the Warren Buffett maxim that poor management is the top threat facing companies.
Worse, boohoo management seems to think it’s great. While admitting bonus beneficiaries had missed their financial targets, it claimed the bonus formula was “was not an accurate reflection of the excellent work carried out during the year”. I despair.
It has also wasted time and money targeting the vast US market. In August last year, Lyttle hailed its first US distribution centre in Elizabethtown, Pennsylvania, as “a complete game changer”. It shuttered that hub this month.
You know what, I’ll stop there. Yes, events are turning in its favour. It should benefit when consumers have more money in their pockets. Costs will start falling sharply. Shuttering that warehouse may save money in the longer run. Perhaps management can still crack the US from the UK. All these things could happen, but I still don’t want anything to do with boohoo for now.
