The Motley Fool

This nightmare growth stock fell 90% in 2018 and there could be worse to come

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Beautiful holiday decorated background with christmas gift boxes ,fir. christmas holiday concept
Image source: Getty Images

In a year that saw the majority of retail stocks kicked about, branded footwear seller Footasylum (LSE: FOOT) stands out as one of the worst performing stocks of them all. 

Priced at 255p a pop back at the beginning of 2018, the shares fell 90% to end the year a little under 26p following a couple of profit warnings. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Based on today’s trading update for the 18 weeks to 29 December, it looks like 2019 could be just as tough for the Rochdale-based firm and its investors. 

Revenue up, but…

At first sight, it doesn’t seem so bad with the company growing revenue “across all channels and all major product categories“. Total revenue rose 14% to a little over £102m. Online sales jumped 28% to £36m and have now contributed a third of total revenue for the year-to-date. Revenue from retail stores was also up 5% to £63.7m.

So, why were the shares down 13% in early trading? Much of this is likely due to the news that gross margin for the full year will now be “lower than previously anticipated” as a result of Footasylum needing to offer more promotions to entice shoppers to buy from the company rather than from rival retailers. This pretty much negates all of the previous positive talk about rising revenues. 

Another reason is the (unsurprisingly) downbeat outlook. According to the company, trading conditions experienced over the first half of its financial year “have continued throughout the Christmas trading period“, leading it to state that its short-term future is “undeniably challenging“. As a result of its desire to focus on cash and working capital,  a cost reduction plan was also announced which may generate some exceptional costs in the current financial year. This means that adjusted earnings will now be “towards the lower end” of analyst forecasts.

I’ll admit to becoming rather interested in Footasylum when it began falling early last year. However, with consumer confidence now likely to remain weak for some time, especially with Brexit just around the corner (at least officially), I’ll continue to steer well clear. At a time when other retailers are closing stores in order to preserve cash, its decision to open five new sites (and upsize three others) in time for Christmas looks increasingly misjudged. There could be further pain ahead for those still holding.

Price jump

Also reporting today was lifestyle clothing and accessories business Joules Group (LSE: JOUL)

Although its share price didn’t suffer to quite the same extent as Footasylum’s, many investors still chose to dispose of their holdings in the small-cap over 2018. From a peak of 387p back in June, the shares had fallen 37% in value before this morning’s trading update was released to the market.

The reaction to the latter, however, couldn’t be more different with the stock jumping 5% in early trading. 

Retail sales increased 11.7% over the seven weeks to 6 January with growth seen “across all the brand’s product categories” and almost half of these sales achieved online. Crucially, management continues to believe that pre-tax profit for the full year will be in line with expectations. With many retail stocks issuing warnings, this is pretty encouraging stuff.

On 18 times earnings before this morning, Joules isn’t cheap to buy, but it’s surely a more palatable option than Footasylum. Interim numbers for the six months to 25 November will be released in just over two weeks. 

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Joules Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.