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I think it’s fair to say it’s been a wild ride Buhu (LSE: Boo) shares over the past half decade. Following the purchase of fast fashion brands NastyGal And Nice little thing In 2017, the FTSE AIM 100 Until the start of the pandemic, stocks maintained an upward trend – characterized by high volatility and hectic trading activity.
The Manchester-based business is now hovering around 41p. If I had invested five years ago, how much would I have now?
He returns weak
Although it boasts a history of profitability, the online retailer has never paid a dividend. This means that my total income is calculated solely on the fluctuations in the company’s stock price.
Crunching the numbers makes for grim reading. Bhu’s share price has fallen nearly 84 percent over the past five years. Based on this, my initial £1,000 investment would be worth around £164 today.
Financial concerns
Even after those huge losses, I find many reasons to panic. For starters, I’m not sure the brand has really recovered from allegations of poor labor practices in its UK supply chain. This is despite the fact that the company has cut ties with several manufacturers.
In addition, the FY22 results contain a series of revelations on various dimensions that concern me. At £8m, adjusted pre-tax profits were still in the black – but only just. For context, last year saw the company deliver £125m before tax. The group’s net cash also fell by £275m to £1.3m today.
To me, this is not a good place to be for Boohoo when it is struggling to retain customers in the face of inflation and a potential recession.
A bright future?
Nevertheless, while I worry that bullish stocks may represent a value trap, I see some good in the bull case.
There were bright expectations in the results of the company. It was encouraging to see a 14% increase to £1.98bn. It was also announced that the retailer now has 20m active customers – a 43% increase since 2020.
The business also recently partnered with Kourtney Kardashian as a sustainability ambassador. This is an exciting development that could improve the company’s image as an important asset in the fashion world.
Having said that, the initial reception was mixed. Kardashian and boohoo have both been accused of ‘greenwashing’. This could be a very sensitive issue for shareholders as the company undergoes an ongoing Competition and Markets Authority (CMA) investigation with a competitor. ASOS Regarding sustainability questions that can be misleading.
Should I buy Boho stocks today?
So far I’m happy to resist the temptation to invest in Bhu. To say returns were disappointing would be an understatement.
As far as recent financial results go, the business is predicted to be strong enough to weather the macroeconomic storm currently rocking the stock market. However, I’m not so sure right now.
There are some serious risks facing Boohoo stocks. Also, I don’t like the lack of dividends. I believe there are better UK stocks to buy at the moment and I wouldn’t invest in Buho today.