boohoo (LSE: BOO) shares have turned from everybody’s favourite growth stock into a huge disappointment. So, let’s take a closer look at the company’s past performance and see how much I’d have if I’d invested £1,000 in the stock at the start of 2022.
The numbers
The FTSE AIM stock has been rather volatile since the onset of the pandemic. In March 2020, it crashed to 180p. But it quickly rose to an all-time high of over 400p that summer, partly driven by increased demand for online shopping.
Since then, the shares have performed badly and are down 70% year-to-date and 81% in the past year. The stock now trades at just 37p.
That means if I’d invested my £1,000 in boohoo inthe New Year, I’d be left with a worrying £300 now.
How has this happened?
Since allegations of bad working conditions in its supply chain in summer 2020, boohoo has had a run of negative press.
The company, alongside its fast-fashion peer ASOS, is still being investigated by the Competition and Markets Authority (CMA) for misleading sustainability claims on its website.
boohoo’s inability to shake off the bad news has spooked investors and led to a massive sell-off in the stock.
The company’s financials are also worrying. In 2021, it announced a pre-tax profit of £125m and net cash holdings of £276m. The FY22 results showed that pre-tax profit sank to a mere £8m, while net cash holdings plummeted to £1.3m.
There are also concerns that Chinese rival Shein will grab more of boohoo’s market share, as well as worries for the whole fast-fashion sector as consumers (and government regulations) become more eco-focused.
Future Plans
Yet I don’t think boohoo’s future demise is a foregone conclusion. There are some positive figures and news that give me hope.
First, recent results show some improvement on past performance. Revenue is now almost £2bn, a 14% increase year on year. The business has also seen a 43% increase in active customers since 2020 — this list now sits at 20m people.
Despite boohoo’s poor sustainability credentials, its drive to improve its record (overseen by Sir Brian Leveson) has meant big supply chain changes. And the recent partnership with Kourtney Kardashian Barker could help change this image. Her role as a sustainability ambassador could resonate with the shoppers it wants to reach.
Also important to remember is that boohoo owns brands such as Debenhams, NastyGal, PrettyLittleThing and Karen Millen. The wide-ranging portfolio means it reaches a wide variety of consumers. Further acquisitions of higher-end high-street brands could result in even further diversification of customers.
Should I buy boohoo shares now?
The road ahead for the fast fashion industry and boohoo looks shaky.
There were some glimmers of hope in its recent earnings, and new brand partnerships could lead to the online retailer gaining even more consumers.
However, with the company is still under investigation by the CMA and with it being the most shorted UK stock right now, I think there are better companies to for me invest in.
Right now, I won’t be adding boohoo to my portfolio.
