The boohoo (LSE: BOO) share price has fallen 90% over the past three years, making it one of the worst-performing UK stocks.
Reports surrounding the company’s working practices, as well as poor finances, have continued to plague the retailer. That being said, in the last five days, the stock has climbed over 15%. Given this newfound momentum, is now the time for me to buy? Let’s take a closer look.
Changing management
News surfaced earlier this week that boohoo’s CFO Shaun McCabe would be stepping down with immediate effect after a “mutual agreement” was reached. The primary reason for his departure is boohoo’s poor financial performance and continued reputational issues. boohoo has hired Stephan Morana, former Betfair and Zoopla CFO, as his replacement.
The UK retailer has endured a tumultuous trading period after Covid-19 lockdowns eased and consumers returned to traditional high street retailers. High inflation and dampened consumer sentiment also reduced appetite.
Its reputation has also suffered from allegations of unethical treatment of workers, brought to light by a BBC Panorama investigation that ultimately resulted in the closure of its contentious Leicester factory. boohoo still has a presence in other parts of the UK, however, the Leicester scandal serves as a permanent reminder of the company’s tainted past.
Additional issues have since come to light, including the “made in the UK” branding of clothes manufactured in Morocco. The company blamed human error for this mistake, but the issue further dampened consumer sentiment.
All of these factors have led boohoo to become one of the UK’s most shorted stocks, as hedge funds bet on the further demise of the company.
Reasons to be cheerful
I think the new CFO is a good move from boohoo. If some material changes can be made to its finances, investors may reward the company with a share-price bump.
Already, the retailer has been taking steps to reduce costs. The half-year 2023 results showed these steps to be working, after operating costs fell by 16% year over year. The closure of the Leicester factory should help further spur this trend.
The company has also invested heavily in warehouse automation, alongside international distribution centers. This combination should help streamline the business and enhance efficiency.
In addition to this, veteran retail investor Mike Ashley has been building his stake in the company for some time now. It always gives me confidence when an industry leader makes moves like this.
A turnaround?
The boohoo share price seems to have found some steam. However, I don’t think this is enough to convince me of a true turnaround. For me, there are too many short-term hurdles to consider buying. I will be waiting to see how boohoo’s new CFO impacts its results before I consider making a move. For that reason, I won’t be buying the stock today.
