It’s a sign of just how far the boohoo share price (LSE: BOO) has fallen that many will welcome the prospect of controversial dealmaker Mike Ashley seizing control of the ailing retailer.
When I looked at the stock on 16 September, I was horrified. The optics of boohoo heir Umar Kamani throwing a four-day celebrity-packed £20m wedding on the Côte d’Azur in May, then axing 1,000 staff days later weren’t great. Things didn’t get better.
The board was planning to hand £1m each in bonuses to CEO John Lyttle and co-founders Mahmud Kamani and Carol Kane, as a reward for performance. A crashing share price, plunging sales, shrinking cash flows and rocketing debt? Thankfully, shareholders blocked the payouts.
Investors must be crying their eyes out
I was appalled by the hash boohoo made of its first US distribution centre in Elizabethtown, Pennsylvania. Hailed, as a ”complete game-changer” when it opened last year, it shut in September with a write-down of £80m.
boohoo has been knocked by wider events too, as high street reopenings and competition from budget rivals like China’s Shein hammered the fast fashion sector.
Enter Ashley as a white knight! Who writes this stuff? Still, he’s worked wonders for the Frasers Group share price, which is up 155.15% over five years. Over the same period, boohoo’s down a dizzying 88.9%.
To be fair, there’s little to separate the stocks over the last 12 months, with Frasers up just 0.32% and boohoo down 0.4%.
Events are speeding up. On 18 October, boohoo announced a 15% drop in half-year sales to £620m and Lyttle’s departure. Yet the board still claimed boohoo is “fundamentally undervalued”, and is considering breaking up the business.
I’m actually backing Frasers Group
Frasers has built up a 27% stake but still doesn’t have a position on the board. It slammed boohoo for everything from an “abysmal trading performance” to its “wholly unsatisfactory” £222m debt refinancing.
I won’t go into further details of this corporate slugfest. Instead, I’ll ask why any investor would want to get involved.
To be fair, boohoo still boasts a string of top brands, including PrettyLittleThing, Debenhams, Karen Millen, Coast, Dorothy Perkins and Warehouse. It has a low price-to-revenue ratio of 0.3, which means investors are paying just 30p for every £1 of sales. As interest rates fall shoppers could feel a bit more flush, and spruce up their wardrobes.
However, boohoo made a pre-tax loss of £75.6m in 2023 and £159.9m in 2024, and isn’t expected to deliver a profit until 2027 at the earliest.
I won’t invest with today’s boohoo board still in place. My only hope is that Ashley will muscle his way in and deploy some of his dubious magic. If he can unleash some value, the shares could suddenly fly.
That’s a binary bet and I won’t buy boohoo. Instead, I’ll cheer Ashley on from the sidelines. Now that’s something I never thought I’d say.
This post was originally published on Motley Fool
