Boohoo shares: time for me to admit defeat?

This Fool is nursing heavy losses from his Boohoo Group (LON: BOO) shares. Should he sell up and move on?

| More on:
Hispanic man using laptop in home office and drinking coffee

Image source: Getty Images

Looking at the performance of my portfolio right now isn’t pleasant and one position hurts more than most. It’s a bit like having my eye repeatedly poked. Boohoo (LSE: BOO) shares are down 50% in 2022 alone (so the sentiment in its name is quite fitting). In the last 12 months, they’ve fallen a staggering 81%.

Having been bullish on the stock for so long (and despite making good profits in the past), is it time to surrender and move on?

The case for selling is strong

I won’t deny that there are convincing reasons for thinking I should throw in the towel. Galloping inflation is just one of them.

Boohoo’s fast-fashion offer may not be the most expensive (actually, that’s an understatement) but this period of belt-tightening isn’t great for most retailers. New clothes are nice but the expense, even at the value end, can usually be put back.

Oh, and it’s worth remembering that things are expected to get even harder over the rest of 2022. To make matters worse, inflation is also raising costs at the company.

Boohoo shares are also extremely popular with short-sellers. These are traders who aim to make money by speculating that the price will continue falling. Ominously, only Cineworld and B&Q owner Kingfisher are more ‘hated’. Competition from the likes of fast-growing Chinese firm Shein could be behind some of this negativity.

There’s also a psychological benefit to taking a loss. Getting rid of Boohoo shares now wouldn’t be pleasant but it would stop the rumination. It also means I can take what money is left over and invest it somewhere else.

So perhaps this relationship just needs to end?

Reasons to be… optimistic

Then again, maybe not. To these eyes, Boohoo looks a better business than a few years ago.

Yes, the infamous issues with suppliers haven’t covered the company in glory. However, it has firmly committed to its ‘Agenda for Change’.

Trading hasn’t been horrific either. UK sales returned to growth in May, prompting full-year guidance to be maintained. And the business now has a large number of popular brands — including Debenhams, Karen Millen and Coast — in its portfolio.

Investors might also argue that now is the worst possible time to sell anyway. If I truly believe in the e-commerce giant, surely now is the time to accumulate? A valuation of almost 16 times forecast earnings for the next financial year is tempting.

Not alone

Another thing to bear in mind is that Boohoo is far from the only retailer whose share price is dramatically lower in 2022. AIM-listed rival ASOS is down 62% this year and 81% in 12 months. It’s also heavily shorted. Fine – that’s hardly a bullish sign but it does imply that the sector sell-off has been fairly indiscriminate.

Short sellers can be caught off guard as well. If a company performs even slightly better than expected, we sometimes get a short-squeeze. Traders rushing to close their positions can turbocharge the share price upwards.

Patience required

The Foolish philosophy is to buy and, importantly, hold on to great company stocks for years. This includes learning to ignore periods of temporary underperformance.

I think Boohoo shares are worth owning, based on the arguments presented above. So I’ll hunker down and ride out the storm.

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 considered so you should 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

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How I’d use the Warren Buffett method to profit from the next bull market

How can Warren Buffett's guidance help us to pick the most profitable companies to invest in over the next couple…

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing Articles

Here’s how much I’d have now if I’d invested £1k in Scottish Mortgage shares 5 years ago!

Scottish Mortgage shares came crashing down last year after a multi-year bull run. But would I have made money if…

Read more »

Mixed-race female couple enjoying themselves on a walk
Investing Articles

How I’m using £120 a month to aim for £12,500 a year in passive income!

Everyone wants to earn passive income, right? Well I'm looking to invest the money I don't need now, to generate…

Read more »

Close-up of British bank notes
Investing Articles

Here’s the Legal & General dividend forecast for 2022 and 2023

Legal & General has paid out some monster dividends in recent years. Here, Edward Sheldon looks at the dividend forecast…

Read more »

Female analyst sat at desk looking at pie charts on paper
Investing Articles

Is now the time to be snapping up Rolls-Royce shares?

Rolls-Royce shares have faced numerous setbacks in the recent past. However, could now be the time to buy? This Fool…

Read more »

Investing Articles

Here’s why GSK and Haleon shares have tanked this week

Shares in both GSK and its spin-off Haleon have plummeted this week. Edward Sheldon looks at what's going on and…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

My Aviva shares leapt 17%. Should I sell or buy more?

Aviva shares have soared by a sixth since I bought them in late July. Should I sell after this sudden…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

Lloyds shares are down 20% since January. Should I sell or buy more?

Lloyds shares have fallen by almost a fifth since their 2022 peak of 56p in January. Having bought some at…

Read more »