Why the Boohoo share price fell 66% in 2021

Paul Summers summarises what’s proved to be a turbulent year for the Boohoo Group plc (LON:BOO) share price.

| More on:

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.

Hispanic man using laptop in home office and drinking coffee

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Boohoo (LSE: BOO) share price fell an astonishing 66% in 2021. Today, I’ll take a closer look at what happened and why the market has seemingly fallen out of love with the fast-fashion giant.

It all started so well

Holders of this stock must have been being optimistic as they entered 2021. At the beginning of last year, the Boohoo share price was riding high at 340p.

An encouraging trading statement in January went some way to justifying this momentum. Strong growth across all its brands and geographies in the last third of 2020 was reported. Accordingly, the company raised its guidance on full-year revenue. News later in the month that Boohoo had snapped up a number of brands, including Debenhams, was also positively received.

In March (and facing a potential US import ban), Boohoo was once again forced to defend its supplier practices. The AIM-listed firm published a list of 78 approved manufacturers as part of its ‘Agenda for Change’ programme. After a slight dip, the share price duly recovered, helped by news of a new warehouse that would boost sales capacity to above £4bn.

The Boohoo share price starts to tumble

It’s at this point that cracks began to appear. Helped by the rise in online shopping over the pandemic, full-year results in early May showed a 41% jump in revenue to £1.75bn. A 37% rise in core earnings to £173.6m was also reported.

Away from the headline numbers however, Boohoo said the the benefits of reduced returns seen over the pandemic would now lessen, but higher costs were here to stay. The company’s decision to maintain guidance in June’s trading update (despite sales rising 32% in Q1) also pointed to management becoming increasingly cautious on the firm’s near-term outlook. 

As the months passed, a significant minority of investors appeared to be growing frustrated with the company’s founders. No less than 12% of shareholders opposed the re-election of Carol Kane to the board. A statement that the online fashion retailer would be investing £500m in the UK over the next five years did little to appease owners.

The worst was yet to come. In September, the Boohoo share price fell sharply as it warned that previously-highlighted higher costs in its supply chain and higher wages for its workers would impact margins. This was followed by a lowering of full-year guidance in December’s (unexpected) trading statement. As expected, more clothes were being returned by customers. A serious slowdown in sales abroad, issues with deliveries, and ongoing cost inflation were also blamed. Omicron wasn’t helping matters.

Boohoo briefly became a penny stock when, in mid-December, the shares dipped to 97p. They had not been this low since September 2016. Perhaps the only crumb of comfort to holders was that industry peer ASOS was also ending the year firmly out of favour.

More news soon?

As things stand, analysts believe earnings per share will fall by 23% in the current financial year. This would leave Boohoo’s stock on a P/E of 20. Whether that proves to be a bargain for long-term investors remains to be seen. 

Based on past form, the £1.5bn-cap may provide the market with another update on trading later this month. Should this be the case, The Motley Fool UK team will be on hand to update readers.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended ASOS and boohoo 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.

More on Investing Articles

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

A brilliantly reliable FTSE 100 share I plan to never sell!

This FTSE-quoted share has raised dividends for more than 30 years on the spin! Here's why I plan to hold…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

This 7.7% yielding FTSE 250 stock is up 24% in a year! Have I missed the boat?

When a stock surges, sometimes it can be too late to buy shares and capitalise. Is that the case with…

Read more »

Investing Articles

£13,200 invested in this defensive stock bags me £1K of passive income!

Building a passive income stream is possible and this Fool breaks down one investment in a single stock that could…

Read more »

Investing Articles

I think the Rolls-Royce dividend is coming back – but when?

The Rolls-Royce dividend disappeared in 2020 and has not come back. But with the company performance improving, might it reappear?

Read more »

British Pennies on a Pound Note
Investing Articles

Should I snap up this penny share in March?

Our writer is considering penny shares to buy for his portfolio next month. Does this mining company merit a place…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Stock market bubble – or start of a bull run?

Christopher Ruane considers whether the surging NVIDIA share price could be symptomatic of a wider stock market bubble forming.

Read more »

Investing Articles

Buying 8,254 Aviva shares in an empty ISA would give me a £1,370 income in year one

Harvey Jones is tempted to add Aviva shares to his Stocks and Shares ISA this year. Today’s 7.37% yield isn't…

Read more »

Investing Articles

Is the tide turning for bank shares?

Bank shares are trading on stubbornly cheap-looking valuations yet business performance in the sector is broadly robust. Should our writer…

Read more »