Can Boohoo's new strategic priorities revive its share price?

Boohoo (LSE: BOO), the online fast fashion retailer, continues to face challenges as its share price falters, marking a departure from its previous success during the pandemic. The company recently reported heavy losses of £90.7 million before tax in its 2023 annual report. To counteract this decline, Boohoo plans to implement cost-cutting measures and enhance operational efficiency. In addition to its financial woes, Boohoo found itself embroiled in a dispute with Revolution Beauty.

Boohoo has experienced a notable decline in its share price, resulting in disappointment among shareholders over the course of the year. Although the company witnessed significant growth during the pandemic, with sales surging from £857 million in 2019 to £1.9 billion in 2022, its revenue growth has recently slowed down. Sales saw a 41% increase in 2021, which decreased to 14% in 2022 and further dropped to 11% in 2023.

According to Boohoo’s 2023 annual report, covering the period from March 1, 2022, to February 28, 2023, the company experienced losses of £90.7 million before tax. This figure represents a significant drop from the £7.8 million profit reported in the same period of 2022. In 2020, Boohoo’s profits amounted to £92.2 million. Adjusted EBITDA also saw a decline from £125.1 million in the previous year to £63.3 million in 2023.

Boohoo attributes its profitability challenges to several factors, including the decrease in sales, inflation-related expenses for freight and logistics due to the pandemic, and rising costs of labour and energy. The company also cited additional non-recurring costs, such as the investment in automating its Sheffield factory and a staff restructuring initiative.

To revive its sales, Boohoo has revisited its strategic priorities, focusing on enhancing its supply chain to improve delivery times. The company has reduced its inventory by 36% and is exploring automation technologies to boost efficiency. Additionally, Boohoo has requested a 10% discount from suppliers for the second time in two months. In May, the company had already asked for a similar discount and extended its payment terms from 30 to 60 days.

The decline in Boohoo’s share price reflects its fluctuating sales performance. After experiencing a significant rally between January 2019 and June 2020, with the stock price surging over 145% to reach 433.5p, the company’s shares plummeted by more than 91%, closing at 33.89p on June 30, 2023. Year-to-date, Boohoo’s share price has fallen by 4.35%.

Notably, Frasers Group, led by Mike Ashley, seized the opportunity presented by Boohoo’s devalued shares and acquired a £22 million stake in the company in June. Frasers Group now holds a 5% stake in Boohoo, viewing it as an appealing prospect for collaboration with its own brands.

Boohoo’s lacklustre performance in the stock market raises questions about its future potential. Analysts, who closely follow the company, have set a 12-month median price target of 42p, suggesting a possible 42% increase from the recent closing price.