Now, in the space of just one quarter, so much has changed. The autumn’s protracted equity sell-off saw share prices de-rate across the board, but this was exacerbated for retail stocks by particularly poor trading in November.
A dismal festive trading period was sealed by a profit warning from Asos (ASC), a close rival of Boohoo and, arguably, one of the best-performing retail stocks of the millennium so far. Despite the odd blip – including an emergency fundraising two years after its IPO and a fire at its Barnsley warehouse in 2014 – the stock has performed incredibly well, reaching an all-time high of 7,688p in early March 2018. Compared with the lowly IPO price of 20p, that marks a 38,340 per cent appreciation. The mind boggles.
Fast forward to early 2019 and Asos's shares change hands for just 2,750p. The stock has lost two-thirds of its value since late December. Those still bullish on the shares might argue this is simply a temporary correction – like the one that investors had seen before in 2014. That year was also peppered with profit warnings, as the group slashed prices and relied on less profitable sales to maintain a competitive edge.
In hindsight, is it any coincidence that 2014 was the year that Boohoo floated too? The online fast-fashion market was becoming increasingly crowded, and Boohoo’s own profit warning – less than a year after its debut – only put investors even more on edge. But these shares have always carried lofty valuations which leave investors exposed to sudden shocks. It’s a leap of faith, but those able to stomach it have previously enjoyed enormous pay-offs.
The question is, has the moment passed? Not only is the market still crowded, there seems to be a growing backlash, not only from investors but also from the general public. Concerns over sustainability started to gather pace after The Environmental Audit Committee called on five online-only fashion retailers – including Asos and Boohoo – to give evidence at a hearing last November as part of an inquiry into the "mountains of non-recycled waste" in the fashion industry. At the time, a spokesperson for Asos said the company was "looking forward to co-operating with the committee", while Boohoo declined to comment beyond confirming its receipt of the letter. But that didn’t stop parliament from name-checking Boohoo specifically for producing £5 dresses which it warned were of such low quality that charity shops refused to sell them on.
The feeling that the tide has turned is palpable. This week, Boohoo issued a trading update that revealed strong sales growth across all regions during the last four months of 2018. Group revenues rose by 44 per cent to £328m in the quarter, translating into a 10-month growth rate of 47 per cent to £723.5m. As such, revenue growth for the financial year to 28 February 2019 is expected to land somewhere between 43 per cent and 45 per cent – ahead of the previous 38 to 43 per cent guidance. Numbers like this would normally fuel an upward share price movement. But Boohoo's shares fell heavily in early trading before recovering to end the day down nearly 5 per cent. It seems investors haven’t forgiven Asos for its sins, nor Boohoo for its current iniquity.
