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@Jjo this might be of interest to you from You Gov, this is sums up nicely that wider Demo that i think is so important for the BH Group, hopefully link works!
So this again is confusing and surely means the stock is a sell not a buy? If PLT will get whipped away then given the huge forward earnings multiple at what rate of growth do the Debs and Arcadia brands need to be to offset this?
Can someone ask rag please as I think he’s just told us to expect a profit warning?
Well why even buy Debs etc in first place? To understand why you need to know the History, the DNA of Debs and Arcadia Brands runs thick thru the veins of Kamani due to Pinstripe, which he owned, they made and supplied them for years, this was during the Debs hey day of Belinda Earl with Designers at Debenhams, Paul Marchant (CEO Primark was head of buying @ Debs) John Lyttle initially worked for Phillip Green as head of Burtons, laterly he would go on to work with Paul at Primark as well as Andrew Reaney, all inter twined , all aware of the past and the nuances that made it such a massive success. Debs Arcadia was bought off the back of the DNA and awareness of the past and a total understanding of how under a new medium it could be potentialized once again. I suspect Designers at Debs to be resurrected, its demo knows it well it was massively successful, this time tho like Molly Mae it will be influencers at Debs , collabs at Debs , lesuirewear ranges put together in collabs EG our latest Ladies Tennis Champ. Its fashion , dismiss nothing , expect change. They have the teams and management to do this now , Debs was bought for a myriad of reasons at forefront is that it is not a PLT one dimensional Brand, Debs can target a whole new demo , of course strategic and focused thats a given But hey what the hell do i know , i only announced on here that BH would go for Debs before it was even muted and Mitch Hughes wud join the Group weeks before it made the press, just my point of view, doesnt mean im right however i do back myself on fashion shares and very little else and so far ive done ok
I think if you asked most investors what they'd like to see boohoo doing with cash, it would be investing in distribution and pushing the winning formula that got them here. I'm not saying debs is a side show but it's a longer term vision. It's also U.K. centric where as boohoo and plt are making ground in the US so I wouldn't be so sure debs will ever dwarf them
Boo can not afford to sit still either ,they have expanded and trying to grow which they are doing and with the right approach
I don't agree here. I think one of the biggest mistakes boohoo could make is spreading theirselves thin trying to be everything to everybody indiscriminately. You take on next on competitors from a position of strength, you don't sacrifice further investment into your most successful leading brands and growing that winning formula into new markets like the US in favour of taking on the likes of next with relatively weaker brands. Doesn't make sense at all to me.
If you go on Debenham s site boo are selling there own brands and others they own through there site ,no debt here and good management dyor
Jjo totally wrong in my book re the Brand aquasitions, you only have to peer over at Next to see the potential of their demographic, i n time combinrd Debs offer will dwarf PLT. What happens if urban grunge trend becomes massive amongst next generation PLT glamour girl will be wiped off map, of course not in short term, in fashion nothing is forever and PLT is extremely one dimensional at somepoint will 100% need reinventing, Debs some brands are steady eddie, very Next, others can be tweaked to be alot more egdy, BH Group has the portfolio to do this, Topshop rememder was once the Golden Goose, sit still in this game on young directional fashion and your dead , the moment you think you've cracked it you go down pan, Debs Brands not so much. Debs Brands failed because they were stripped of all their value when they were bought out years back, assets were ripped out and it was re floated with a very muted reaction from the City and ut never re covered. All that value in terms of buying teams for their own buy Brands is being added back in and i expect in time the combined affect to be bigger than PLT and to have much more longevity as its so diverse.
Well this is the point, I mean I've never looked into them much because they are tiny in terms of revenue and not likely to be a big driver even in several years as individual brands. I would hope the brand portfolio is targeted, well thought out and refined over time than simply added to indiscriminately. Weak brands should be ditched if under performing over time, last thing we want is mediocre brands under the umbrella. One or two debs brands might do well, but remains to be seen.
@jjo I think rag doesn’t get the “data” point. He thinks “Debenhams had this” they didn’t. Debenhams just had a list of beauty club members which was pretty much a mailing list
I think you have to be careful to assume rag knows even the basic terms although I admit you laid out the Amazon example well. It’s just been missed by the audience
Re your last point I think worth asking him what the respective revenues were of these brands pre acquisition. I think then he can explain how they will be the main value drivers over boohoo and plt
Admittedly I don't know much of the brands that came with debs, you probably do so happy to be corrected. How much brand value have these brands got? I may be underestimating the potential, but they are not as strong as the other brand aquasitions boohoo have made are they, Or have I got that wrong?
In terms of some of the brands that came with Debs some of which you've mentioned, it remains to be seen if they can do anything with them. They are afterthought in the debs deal. The investment and staff are required whether those brands survive or not, but none of the brands you mentioned will ever be as big as PLT.
Rag I get you work in the sector, but there's no way low margin online retailing of brands it does not own is a focus for boohoo without an ulterior motive, and debs had nowhere near the data driven operation boo boo could create.
They obviously want to be a fashion and beauty brand to as many demographics as possible, and in the short to medium term if marginal cost of retailing these brands is small then it makes sense for boohoo to use them to help boohoo achieve a broad offering quickly to drive traffic and access to more demographics but longer term the goal will not be as a low margin platform for brands they don't own. Much more likely to use it to broaden their own product offering over time, especially into beauty .
Jjo, def i see the value in the data, Debs already had this , havent got tine to search but registered customer numbers were very good and the wider demo is for me at least 100% where the value is going to come from. Of course everyone wants this share to go up and it does so for many reasons not just earnings, same thing applies to share going down some on here sold on fleagate, i understand why a jittery investor with no background knowledge of industry would do so., in fact BH earninfs ncreased. So many things add value to this share and also detract from it, the whole picture adds up to the way investors see BH Group and i get to see an awful lot of it, including knowing most of the new management , which takes me back to the beginning and the Debs wider demo and the confidence in the teams to deliver revenue on these brands and for them to finally put to bed any major non compliances that plague this share.
If boohoo can apply their data analytics to millions more people from wider demographics (at Debenhams), that is where the value is, it's nots in low margin retailing.
Well if we start from the understanding that boohoo have gone from sales of 195 million to 1.7 billion in 5 years, we all have to agree boohoo have some sort of competitive advantage. Last time I looked businesses did not grow at that rate into over 100 million in profit in that time frame without a competitive advantage, unless we live in some sorts of alternative Kallu world where left is right, up is down. Obviously if incumbent businesses could do what boo do and boo had no competitive advantage, incumbents with much deeper pockets would have just done it, and stopped boohoo's rise. The fact they didn't isn't because they didn't want to it's because they couldn't.
So what is the competitive advantage. It's Speed and data and and boohoo's distribution network. Test and repeat is not new, but its much more agile and much faster online only. That retail space on consumers phone screens is incredibly valuable, and one of the reasons is that the data it generates allows businesses like boohoo to tailor its marketing and product offering very quickly and very precisley. Surely anyone can understand why it's just so much more efficient to do this online only than with bricks and mortar. If I walk into a Primark, what does Primark know about me? 90% of everything I see in the store is irrelevant to my needs. A boohoo customer sees marketing and products tailored to them every time they click that button that's sat on the Home Screen of their mobile phone. And the choice available is unparalleled in bricks and mortar stores. It's not a complicated concept. It's Amazon. That product can be delivered to you before you've even had the time to get to Primark.
In terms of selling products of brands you don't own, there is some value in it in terms of margin especially if there's little added cost. But it also is likely to be valuable in terms of data. We saw this with Amazon. Amazon basics comes from data driven analytics. They see a brand of kitchen knives selling really well on their platform, make a similar product themselves at a cheaper price point and push their own offering. I don't know what boohoo's aim is with Debenhams, but I doubt its some big rush into low margin retailing. Might also assist in future brand acquisitions, not sure.
As for the p/e I think this is where people like Kallu make big errors. I've made the same errors in the past of avoiding what on the face of it seem to be expensive companies. I no longer make the distinction between growth and value. All investing is value investing but you can get trapped into poor businesses looking around for things that are nominally cheap. The problem is boohoo asks you to make a qualitative analysis of its growth prospects to recognise its a value investment, rather than a quantitative analysis of its current cash flows. I'm not sure what a normal price to earnings ratio is, but boo is not expensive at this price.
Refreshing to have someone on here who seems to "get it". Just curious if we can get your view on a few other parts of this business
Test & repeat is is useful and how much does doing it online with data give extra speed and agility? How does that compare with a store operator? Do you think test and repeat is doomed to fail? Even though Boohoo have proven this works with oasis, wallis and most profoundly with KM?
Does a clothing business usually make a great margin from in-house or selling third party brands?
Also in terms of valuation of the business do you think it would be better if boohoo had a "more normal p/e" rating?