What do the French-based ELEVA Capital, Ennismore Fund Management, GSA Capital Partners, GLG Partners and the Hong Kong investment managers Qube Research & Technologies have in common?
The answer is simple – they are all ‘short’ of the shares in the Kumani’s online clothing empire.
In total their positions represent a bearish 5.05% chunk of the £455m group’s equity.
Is It An Apt Definition?
The meaning of ‘boohoo’ is to weep loudly and with sobs.
The impeccable Lord Jeffrey, editor of The Edinburgh Review, confessed to having cried, blubbered, boohooed, snuffled, and sighed – over the death of Little Nell Trent in The Old Curiosity Shop, which was written by Charles Dickens and published in 1841.
Nowadays the phrase is often used as an interjection, especially in mocking imitation of another’s tears, complaints, unhappiness.
Could that describe the market onlookers as they observe the share prise demise of the boohoo group since its peak at over 412p four years ago – having collapsed over 87% to the current 36p.
But Who Is It Good For?
The answer could well be that the recent mega-loss news is of benefit for Mike Ashley’s Frasers Group (LON:FRAS).
That is because he has been taking advantage of the lower share price to carry on ‘mopping up’ more shares in the fashion group, recently buying around 13m to add to his position.
His group is now the biggest holder of boohoo equity – with some 293,028,671 shares, representing 23.10% of the company’s stock.
Recent Results
The results announced last Wednesday were as expected, reflecting ongoing challenging conditions, with the year to end February 2024 showing sales down 17% at £1.46 bn, with the adjusted pre-tax loss collapsing from a previous £1.6m negative to a massive £31.0m loss.
In the last trading year, the assorted brands within the group have seen an 11% fall in active customers to 16m, with a 13% drop in orders to 48.5m, and a 3% easing in the average order value to £51.68.
On a geographical basis, the group’s revenues were 63% derived from the UK, 20.5% from the USA, 11.3% from the Rest of Europe and the Rest of the World generating the balance.
With the hope for improving market conditions, the group is expressing confidence in its medium-term outlook.
Group CEO John Lyttle stated that:
“The group is now well positioned to return to growth, and we are focused on ensuring that growth is both sustainable and profitable.”
Broker’s Views
Analyst Rachel Birkett at Zeus Capital considers that the group is now on track for some £125m of annualised cost savings in the current year, she is anticipating a return to growth delivering some operational leverage, enabling a doubling of EBITDA margins to range 6% to 8% over the medium term.
For the current year Birkett estimates £1.48bn sales, a more than halved adjusted pre-tax loss of £15.3m.
For the 2026 year she goes for £1.55bn revenues, and a £2.4m loss.
Her DCF valuation of the group’s shares is equivalent to 57.2p per share.
Analyst Wayne Brown at Liberum Capital has retained his Hold recommendation, with a target price of 32p, compared to the current 37p.
He notes that the group is using 2024 as a ‘fix-up’ year but it won’t get interesting until the second half.
“It has shifted its strategy to core brands that have created ‘noise in revenues’ and despite the tough trading there are ‘green shoots appearing’, with improvement in earnings margins reflecting ‘work done on admin and distribution costs’.”
“The shares look attractive trading at only 1.3 times price to book, and while we believe the group could soon turn the corner back into revenue growth, the timing of this remains uncertain so we remain “hold” but the second half of this year looks much more interesting.”
Across some 17 analysts that follow the group, the average Target Price is 35p, with 75p being highest estimate price and just 19p as the lowest aim.