Jits time last year, Boohoo had a market value of £4billion and appeared to be flying. It dominated the high street buying back its deadwood brands for online rejuvenation; pandemic business conditions were driving up revenues as companies like Primark had to shut down.
And now? Two earnings warnings later – plus a pessimistic outlook statement on Wednesday – Boohoo is full of grunts. Customers are returning more items, the bane of an online retailer’s life, as they step out of locked joggers and into smarter kit. Freight rates to the United States doubled and delivery times lengthened, undermining the economy of selling fast fashion items to Americans from warehouses in Burnley and Sheffield. The marketing bill has skyrocketed because brands like Debenhams and Karen Millen aren’t reinventing themselves. And the backdrop is consumer demand described as “moderate”.
Boohoo’s market value has fallen to £1bn and the share price is at 70p, virtually the lowest since 2016, a year when annual revenues were £295m, from nearly £2 billion for the last financial period.
Hissing gleefully John Lyttle, the chief executive, believes Boohoo is “well positioned to rebound strongly as pandemic headwinds ease”. Well, maybe, don’t expect the rebound to come anytime soon. Top tier profits, which have just fallen 28% to £125m, will likely go sideways as margins this year are 4% to 7%, down from the 10% Boohoo used to shed from reliably in the past. Meanwhile, a gigantic distribution center must be built in Pennsylvania to solve the United States puzzle. Simply put, costs are rising and the demand picture is unclear with price hikes (likely) underway.
Aside from building an American infrastructure earlier, it’s hard to see what Boohoo should have done differently, but maybe that’s the point: the online clothing game is a tedious business and requires a lot of things to work perfectly. At Primark, which sticks firmly to physical fuddy-duddy stores, life seems easier.
The heat is on for Just Eat
The feeling of chaos at Just Eat Takeaway is getting worse. Adriaan Nühn, chairman of the supervisory board, resigned the morning of the annual meeting on Wednesday, presumably to avoid a beating during the vote of shareholders in Amsterdam on his renewal. Meanwhile, chief operating officer Jörg Gerbig has been unexpectedly removed from the ballot as the company investigates a misconduct claim.
The other directors obtained the majorities necessary to continue, despite the efforts of the agitator shareholder Cat Rock Capital, which holds 6% of the capital, to have half of it withdrawn. But weak approval, it’s safe to assume, won’t clear the air.
The first step would be the sale of Grubhub, last year’s disastrous $7.3bn (£5.7bn) purchase in the US which is largely responsible for the collapse of 75% of the Just Eat stock price since its peak. The company said it is considering its options, but until it finds a workable solution there will be a hint of going through the steps.
The second step would be the exit of Jitse Groen, the Dutch founder who led the acquisition campaign which was clearly too ambitious. If Just Eat still had its main roster in London and hadn’t decamped to the Netherlands, one suspects it would be feeling more heat.
A tough road ahead for Aston Martin
The board of every luxury car maker wants their company to be more Ferrari-like, so there’s no shame in Aston Martin Lagonda hiring a former boss of the Italian star as chief executive. Amedeo Felisa, 75, actually retired from Ferrari six years ago, but he definitely has experience and, since he’s already a non-executive director of Aston Martin, he should know what he’s into. ‘engaged.
One hallmark is a demoralized workforce, if Aston Martin’s emphasis on adopting “a more collaborative way of working” is any guide; he read as a hint that the departure Tobias Moers, a former Mercedes-Benz chief who was Lawrence Stroll’s big rookie after saving Aston Martin two years ago, overdid the tough driving approach. If so, changing drivers is a risk worth taking.
Aston Martin cannot afford detours from here, however. A desperately needed refinance is looming next year in a bid to reduce the interest rates currently being paid on borrowings which totaled £957million at the end of March. The interest bill could be £195m this year, a legacy of the dire financial situation in 2020. Stroll believes he has the right chief executive this time around; he must be right.