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Can Boohoo share price tear higher on turnaround strategy?

Boohoo’s share price has continued to come undone this year after its pandemic-era heyday. Having notched up heavy losses in its last set of results, the online fast fashion retailer is planning to cut costs and boost efficiency. Elsewhere, Boohoo got involved in a spat with Revolution Beauty.

  • Boohoo posts a £90.7m loss before tax in its 2023 annual report.
  • The online fast fashion retailer asks suppliers for a 10% discount for the second time in two months.
  • A war of words erupts between Boohoo and Revolution Beauty.

Boohoo’s [BOO.L] share price is decidedly out of fashion with shareholders. Since the start of the year the stock has continued to decline, as the fast fashion retailer, which was once a pandemic-era stalwart, sees its losses mount.

At the height of the pandemic, customers couldn’t get enough of what Boohoo had to offer. In 2019 Boohoo’s sales topped £857m; by 2022 that figure had risen to £1.9bn.

Yet revenue growth has been shrinking. In 2021, sales grew 41%; in 2022 that slipped to 14%, while in 2023 it was 11%.

In its 2023 annual report covering the 12 months to 28 February 2023, losses before tax were £90.7m, down from a £7.8m profit in the 2022 period. In 2020 profits had come in at £92.2m. On an adjusted basis, EBITDA was £63.3m in 2023, down from £125.1m the previous year.

Boohoo said that profitability had been impacted by the fall in sales, freight and logistics inflation related to the pandemic, and labour and energy cost inflation. It also pointed to additional non-recurring items, such as the cost of automating its Sheffield factory and a staff restructuring programme.

Boohoo tailors turnaround strategy

To repair sales, Boohoo has stitched together a turnaround strategy. In its 2023 annual report, the group said that it was targeting investment in its supply chain to improve delivery times. Boohoo also said that it had reduced its inventory by 36% and was looking into automation technologies to improve efficiency.

In addition, for the second time in two months the online retailer has asked suppliers for a 10% discount on orders. In May, Boohoo had asked suppliers for a 10% discount for all delivered and undelivered clothing, having extended its payment terms from 30 days to 60 days.

Boohoo’s share price comes undone

Boohoo’s share price reflects the fluctuation in sales. Between 1 January 2019 and 19 June 2020, Boohoo’s share price rallied over 145% to hit 433.5p in intraday trading. Since that point Boohoo’s stock has tanked over 91% to close Friday 30 June at 33.89p. Year-to-date, Boohoo’s share price is down 4.35% as the stock continues to fall out of fashion.

Mike Ashley’s Frasers Group took advantage of the decline in Boohoo’s valuation to buy a £22m stake in the company in June. The purchase gives Frasers Group a 5% stake in Boohoo. The group said that Boohoo was an attractive proposition that opened collaboration opportunities with its own brands.

Given Boohoo’s underwhelming share price performance, is there any upside in the stock? Analysts covering Boohoo have a 42p 12-month median price target. Hitting this would see a 42% upside on Friday’s close.

Boohoo and Revolution Beauty in boardroom spat

Boohoo is trying to exert its influence on Revolution Beauty [REVB.L], a cosmetics brand it owns a 26.6% stake in.

At Revolution Beauty’s June AGM, Boohoo instigated a vote to kick out the CEO, chief financial officer and chairman. While the vote passed with a 75% majority, the three were promptly reinstated by remaining independent director Jeremy Schwartz, reports City AM.

Boohoo had hoped to oust the executives and draft in its own personnel to boost ecommerce expertise at Revolution Beauty. Boohoo said that it could not see how the “board can claim to be acting in the best interests of shareholders”. In return, Revolution Beauty described Boohoo’s plans as “opportunistic and self-serving”.

Revolution Beauty’s AIM-listed shares restarted trading on Wednesday, having been suspended in September after an investigation into the company’s accounting practices found a laundry list of issues, including overstating sales by £9m.

In a statement to the market, Revolution Beauty said its management team would receive a £2m share award for their work resolving “historical issues” prior to the stock’s readmission. Revolution Beauty's share price closed 20% up in the week after making its comeback.

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