Boohoo Group (LSE: DEBS) just released the latest episode in its long-running recovery saga, and the share price spiked up 50% in early trading.
First-half results released Thursday (27 November) were accompanied by news of a Group Turnaround Scheme (GTS), aimed at incentivising executives and senior management over the next five years.
Should the full GTS target be reached, the maximum value of awards would reach £222m. And that would mean a 5% dilution for existing shareholders. But to get that much, the Boohoo share price would need to reach 300p. And that’s 25.9 times the closing price the day before the announcement.
Shareholder approval is apparently not needed for the new plan.
First half
In the six months to 31 August, it looks like Boohoo managed to stem its losses significantly. Continuing operations saw a reported £3.4m loss after tax, way better than the £127m loss recorded in the first half last year. And the group’s total loss after tax of £14.7m compares impressively to £139m a year ago.
It’s not all sunshine and roses yet though. Total revenue fell 23% to £297m (impacted by the shift to a marketplace model), with gross profit down 24% to £157m. And free cash flow, while a lot better than the £38.9m outflow in H1 last year, was still negative at £22.1m.
CEO Dan Finley said: “This is a multi-year journey, and we have a clear plan and the right model in place. We are transforming into a lean, tech-enabled, best in class online platform business. The momentum we have built in the first half sets us up well for the remainder of FY26 and we expect Adjusted EBITDA to be ahead of last year.”
The way forward
I think this really could be a pivotal moment for Boohoo. But I’m not convinced its time for celebratory fanfare just yet.
This set of interim results is better than I was expecting. But a lot of the progress comes from cost-cutting over the past year and more. We’ve seen disposals and we’ve seen job cuts. And the latest figures show a 27% fall in operating costs with capital expenditure cut 50%.
Getting costs down in the chase for profitability is a good start. But what comes next really counts. Is there any way Boohoo can get back to being the growth stock darling of old?
Verdict?
The rebranding to Debenhams has to be a positive move — ditch the name associated with failure. But it’ll need more than that to get anywhere near a 25-bagger in five years. Never mind the three-bagger needed to even get on the first rung of the turnaround scheme laddeer.
Forecasts had showed losses at Boohoo falling slowly in the years to 2028. I expect they’ll need to be upgraded now. And any sign of forecast profit could give the shares a boost.
I notice CFO Phil Ellis and a couple of non-executive directors snapped up around 660,000 Boohoo shares between them in September. They’re already in profit. But for me, I’m holding and taking a wait and see approach.
