Boohoo Group PLC (AIM:BOO) results today showed it nosedived to heavy losses, but its positive balance sheet and upbeat outlook leave it better positioned than competitor Asos to recover – and possibly put it in the shop window.
The spotlight has been on pure online retail players such as Boohoo and Asos and how they have fared as the highs of the pandemic fade into memory.
High levels of customer returns, inflated freight costs and a lack of physical presence are just some of the factors that have weighed on performance since restrictions were lifted.
The abject performance in recent years has seen Boohoo shed 90% off its share price peak in June 2020, crashing down from 408p to 40p, while Asos has lost 88% to 400p over the same period.
Problems which have dogged the retailers have raised questions about the future for two of the UK's two players in the online retailer space.
Boohoo’s results may, however, have signalled there is light at the end of the tunnel.
Although it posted a full-year loss of £90.7mln, shares bounced as investors welcomed a cash position of £5.9mln, free cash flow of £30.2mln and £330.9mln of liquidity headroom.
Boohoo seems better placed to recover compared to Asos, as City analysts converge on the belief that Asos will need to pass around the cap soon.
“Given the ongoing restructuring and cost savings initiatives, it is becoming increasingly evident that Asos will need to seek further capital infusion to support its long-term viability,” said Shore Capital's Eleonora Dani.
Asos continued to burn through significant sums while holding more debt and guiding lower margins than Boohoo.
In contrast, margins at Boohoo are expected to improve on the 50.6% it reported, while its cash generation highlighted its ability to sustain itself in its turnaround plan, according to Josh Warner, analyst City Index.
Today’s full-year results may have just offered boohoo investors and management another route out of its current situation. A private equity takeover.
US firm Apollo Global Management (NYSE:APO) was on the hunt for nutrition and beauty group THG and engineering services outfit Wood Group but failed in its attempts in recent weeks.
However, the firm is still “clearly active” according to Shore Capital's Clive Black.
With UK stocks remaining undervalued, private equity will continue to run the rule over them, and Apollo may just be eyeing up boohoo.