If I’d invested £1,000 in boohoo shares 5 years ago, here’s how much I’d have now!

boohoo shares were a poor investment over the past five years, but will the next five prove more promising for this AIM growth stock? Our writer investigates.

| 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.

Lady wearing a head scarf looks over pages on company financials

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

I think it’s fair to say it’s been a wild ride for boohoo (LSE: BOO) shares over the past half-decade. Following acquisitions of fast fashion brands NastyGal and PrettyLittleThing in 2017, the FTSE AIM 100 stock maintained a steady upward trajectory until the onset of the pandemic — a period characterised by high volatility and choppy trading action.

The Manchester-based business has since plummeted, hovering around 41p at present. If I’d invested five years ago, how much would I have now?

Poor returns

Although it boasts a history of profitability, the online retailer has never distributed dividends. This means my total return would be calculated on the basis of fluctuations in the value of the company’s shares alone.

Crunching the numbers makes for grim reading. The boohoo share price collapsed nearly 84% over the past five years. Accordingly, my initial £1,000 investment would have shrunk to a measly sum of around £164 today.

Financial concerns

I can find plenty of reasons to be bearish even after those enormous losses. For starters, I’m not sure the brand ever truly recovered from damaging accusations concerning poor labour practices in its UK supply chain. This is despite the company terminating its relationships with a number of manufacturers.

Source: boohoo Annual Report 2022

In addition, the FY22 results contained a series of revelations across a range of metrics that concern me. At £8m, adjusted pre-tax profit was still in the black — but only just. For context, the preceding year saw the company delivering £125m in pre-tax profit. The group’s net cash holdings also declined by £275m to a paltry £1.3m today.

For me, this isn’t a good position for boohoo to be in as it battles to retain customers amid spiralling inflation and a possible recession.

A brighter future?

Nonetheless, despite my worries that boohoo shares could represent a value trap, I see some merit in the bull case.

There were glimmers of hope in the company’s results. A 14% uptick in revenue to £1.98bn was encouraging to see. So too was the announcement that the retailer now has 20m active customers — a 43% increase since 2020.

The business also recently partnered with Kourtney Kardashian, who will act as a sustainability ambassador. This is an exciting development that may improve the company’s image, which is a crucial asset in the fashion world.

Having said that, the initial reception was mixed. Kardashian and boohoo both received criticism for alleged ‘greenwashing’. This will likely be a hot issue for shareholders going forward as the company navigates an ongoing Competition and Markets Authority (CMA) investigation alongside competitor ASOS regarding potentially misleading sustainability claims.

Should I buy boohoo shares today?

I’m glad I’ve resisted the temptation to invest in boohoo so far. To say returns have been disappointing would be an understatement.

Until the recent financial results, I’d have predicted the business was probably resilient enough to cope with macroeconomic storms currently engulfing the stock market. However, now I’m not so sure.

There are some considerable risks facing boohoo shares. Plus, I don’t like the absence of dividends. I believe there are better UK stocks to buy at present and I wouldn’t invest in boohoo today.

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.

Charlie Carman has no position in any of the shares mentioned. 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

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »