Jack Grealish is Britain’s most expensive footballer, and online retailer boohoo.com (LSE: BOO) is an increasingly cheap stock.
The £100m Manchester City man – who previously launched a collection with boohoo.com – has now been signed up to work with Italian fashion powerhouse Gucci.
It appears another progressive transfer for the 26-year-old, but what does it say for boohoo? This beaten-down stock was – not for the first time – sharp in identifying a prospect that a legacy brand ultimately chased.
There are other examples of boohoo’s front-foot thinking. Note its history of pouncing on ‘influencers’ from hit ITV show Love Island. Note its heavy emphasis on its growing social media channels. Note its recent step into the Metaverse with ‘Boohooverse’ – where it gave away a raft of Non-Fungible Tokens (NFTs) to drum up engagement.
It remains quick and bold in its thinking.
And yet it trades at 89p at the time of writing, down from a pandemic-fuelled high of 433p in June 2020.
At around this time, senior management were offered significant bonuses if the company’s value hit £7.55bn by 2023. It has, however, plummeted to £1.1bn. Either leadership or the market has lost a grip of price. If the truth is anywhere in the middle then I believe boohoo has significant upside.
There are signs the stock is finding a base, with a series of recent one-day price rises of 5% or more pointing to there being demand at around this level.
Retail – with a cost-of-living crisis upon us – may feel like the investment equivalent of socks with sandals right now (I actually think that’s back on trend but you get where I’m coming from). This, though, is a profitable company free of heavy high-street rents given its online nature, and it has no debt.
Furthermore, its low-price products are exactly what the financially squeezed may gravitate to during testing times.
There is growth too. November’s nine-month earnings release saw sales of £1.48bn – offering year-on-year growth of 16%.
Some may wonder if a company that made its name targeting 16-30 year-olds has longevity given the fickle nature of changing trends.
But consider its acquisitions – Debenhams, Dorothy Perkins and Karen Millen to name just a few. Grealish’s grandmother was not even born when Dorothy Perkins came into existence.
The point is boohoo has diversified. That broadens its markets and lowers risk.
Recent years have seen the company face criticisms for working conditions in its supply chain, an issue it has sought to rectify by stiffening up its corporate governance.
The scandal began the demise of its share price. More recently, a pandemic-related increase in costs and a lift in the number of items returned also saw the share price hit by 23% in a day. Are such falls an over-reaction?
Grealish has arguably failed to deliver value since his expensive move.
boohoo – debt free, lean, growing and packing a sharp eye for an opportunity – could be a bargain signing by comparison, and I will soon add more of it into my portfolio.
