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BOO LN
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Boohoo Group plc

Initiation: July 14, 2017
J Capital Research ("J Cap") is a stock-research company. J Cap has analyzed the U.K.-listed company Boohoo Group plc  (“BOO”) and is hereby publishing the outcome and the conclusions of our analysis, based on publicly available information. Some of our clients may be short shares of IPO, and, for this reason, there might be a conflict of interest.

Few Are Chosen

  • Pretty much anyone can go into online retailing. Survivors are those that can manage their growth, and Boohoo is challenged. Online reviews suggest that the quality of services is materially declining. Ebitda has been propped up by cutting marketing costs, but gross margins are in decline, and heavy capex lies ahead.
  • Over-Valued At 10x sales, the valuation of Boohoo.com is simply too rich. Growing into its valuation would entail very significant capital expenditure as well as faultless execution. The stratospheric rise and abrupt decline of U.S. company Nasty Gal, now acquired by Boohoo, is an object lesson in how tough that is to do.
  • Family Business Around 50 family-owned companies operating out of the same premises as BOO create the possibility, if not the reality, of opaque related-party transactions that could potentially make Boohoo’s margins appear better than they really are. Some of the co-located companies are disclosed suppliers. At the time of AIM admission, in 2014, Boohoo was buying 40% of its product from family companies.
  • Low Entry Barriers There are a dozen businesses almost exactly like Boohoo in Manchester, England, and most of them seem to be struggling to make money. We don’t see what should give Boohoo a sustainable advantage.
  • We Choose ASOS Competing against Amazon is very tough, but if anyone can do it, industry-leader ASOS is the more likely candidate.
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