boohoo group’s (LSE: BOO) share price has been fascinating to follow over the past few years. The online retailer’s stock has fallen over 92% from its 2020 highs. Plagued by the likes of Brexit, the post-pandemic physical stores’ recovery, supply chain issues and wider market uncertainty, the shares have certainly had a tough time.
However, in the last 30 days, the stock has risen a healthy 8.5%. Given this renewed momentum, could now be the right time for me to add it to my portfolio?
Poor performer
At the height of the pandemic, boohoo shares shot up to 413p in June 2020. Remaining pretty volatile throughout the year, the stock finished 2020 at around the 340p mark.
In 2021 boohoo was plagued by a scandal surrounding the treatment of some workers at companies to which it outsourced production. Additional complications arising from Brexit disrupted supply chains making matters worse for the fashion retailer. The rise of cheaper competitors such as Shein and Temu has also dented boohoo’s market share.
These factors combined with a wider market downturn have pushed boohoo shares down to just 33p as I write (6 November).
Bad results
Last month, boohoo released its half-year results. Revenue and gross profit figures showed a 17% and 16% year-on-year fall, respectively. It also stated that it expects revenues to decline by between 12% and 17% in 2024, due to slower than anticipated volume recovery. Based on this, it seemed that investors had little to be excited about.
However, the group did report some positive metrics. These included a 16% reduction in operating costs, a £94m reduction in inventory, and increased margins. However, given such poor top-line figures, I’m not sure these tip the dial in favour of investing.
Light at the end of the tunnel
A great way to spot a good investment is by tracking the market moves of seasoned veteran investors. In the case of boohoo, one big name has been loading up on shares. Mike Ashley, CEO and majority shareholder of Frasers Group has built up a substantial 15.1% holding in boohoo through his vehicle MASH Holdings.
While this could just be a play to acquire the brand and its inventory – which wouldn’t necessarily generate any value for shareholders – it always gives me some confidence when an industry titan buys in.
In addition to this, analysts have indicated that the company expects to increase earnings by 75%. This could spur significant investor momentum should the predictions come to fruition. That being said, boohoo isn’t expected to be profitable for the next three years.
The verdict
All things considered, I don’t think boohoo shares fit my buy criteria. Poor results and fierce competition are both major red flags for me. Although the company has taken some steps to remedy its key issues, I don’t think these outweigh the risks. Although the share price has enjoyed a small uptick this month, I won’t be buying any time soon.
