Member Info for DC2007

For any business I can think of, cash and cashflow is everything.

Assets might be £x and liabilities might be £x, whereas cash simply is what it is. There's no judgement or estimation involved.

Claiming cash is irrelevant is grandly stupid.

Use by most plcs is irrelevant T4G. It's a non GAPP/IFRS measure companies like because it can make earnings look better. And you're falling hook, line and sinker for it.

Cash on hand was £103m, but that includes the £100m drawn down from the revolver. So only £3m is cash attributable to equity owners of the business.

That's a paltry amount of cash compared to what they've been sitting on for the past couple of years; and they were debt free then, not now though.

EBITDA is a weasel measure; adjusted EBITDA is worse. It's a strange opinion that either is the 'best judge of cash'.

Alternatively, isn't the best judge of cash...well, cash? You count it and it's either there or not. Unlike EBOOTDA, it's far harder to obfuscate and confuse the faithful with.

The SP has cratered because profit has quickly reversed from rapid growth, to stagnation, to losses. Shorts didn't do that. They seen what was happening, seen that it was silly overvalued and then capitalised on it. Simple as that.

If it went to the 30s, that says the business is in serious trouble (liquidity event, emergency RI, credit insurance denied, that sort of thing) so I'd avoid at that level PP.

It's very tough externally and I'd expect to see more retailers go under in the coming year than normal. There's worse certainly, but Boo doesn't look an entirely safe bet either.

I'll be tempted when it ducks into the 40s, but only as a trade. Its status as an asset is dubious at best, if not a bit toxic.

There are proper, much better investments out there in the universe of fashion (even fast fashion) & retail.

They've rinsed it through the market to become personally very enriched. Now they take it private at a knockdown price and get rid of all the ESG stuff a plc has to do.

Meanwhile most PIs take a big haircut, losing most of their investment. It's wealth-transfer theatre. If the SP goes much lower, suddenly even 60-70p will seem a tempting premium to those who've hung on.

"For anybody interested here is a summary of what Zalando said this morning. It looks remarkably similar now to the guidance that Boo gave for this year"

Remarkably similar? What tosh! Similar, except that Zalando expect to make a couple hundred million in proper profit and have revenues more than four times of Boo.

If Zalando are finding it hard and cutting forecasts, other online will follow soon. Looks likely Boo will make a loss (i.e. earnings, not EBOODTA) for the second year in a row now.

"with £2bn revenue and £120m profit." That's incorrect: in the last financial year, Boo made a loss.

Comparing it to the net profits which they made when revenues were smaller is likely to lead to misconceptions about the associated change in market valuation.

See the froth falling out the relief rally and this settling in the 50s again.

Ha T4G, you won't even predict the SP, let alone provide a rationale, yet you're happy to ask me to do just that!

40s because it's already looking like it'll now make a loss for the second year in a row. Q1 revs were down on the previous year about 15% (in real terms). That's worth repeating: revenues in just 3 months were 15% *less* than in that same period last year. Nuff said.

'It was definitely a good day for BOo after a manufactured shocker the day before!'

Where's your evidence that the bad day was 'manufactured'? And, assuming for a moment it was manufactured, why would you think the good day that followed to be any less 'manufactured'?

That's fishy and has an underlying structure of: when Boo is down it's a conspiracy/shorters/the universe being bad to me. And then when it's up: ah yes, the business is performing in line with expectations; adjusted EBOOTDA unchanged; and the markets are playing fair again.

It's a lovely example of reasoning by emotion, confirmation bias, and sloppy selective thinking. All symptoms of delusional Boo complex, for which there's no effective treatment it would seem.

That made me laugh! 'No, no, the plunge was Thursday, not Wednesday' — cos the precise day is really what matters, rather than the endless value destruction. Impressively delusional; deck-chairs on the listing Titanic sorta level.

Think Friday was a relief rally only and Boo (along with almost all other retail, and in particular the weaker companies) will grind back down to the low from earlier this week.

A bit further on and nearer H1 results will see the 40s. 40s are more likely than not; but the 30s unlikely and would be the absolute floor I'd expect.

That sort of level suggests liquidity events, creditor problems, running out of cash, debt for equity swap, pre-pack, or admin have become varyingly visible prospects. At that point I'd assume the equity/investment value to be effectively zero.

On the Debenhams valuation: I try to estimate future earnings vs. price paid for said earnings. If £5m/year in perpetuity looked likely, £55m for that cash flow could be reasonable. There's nothing I can find to suggest Debs will earn that soon, or ever. Absent of such indicators, the conclusion of having overpaid remains as the more likely. It'll be written down in a couple of years.

I pasted the bulk of the author's conclusion. No where in the article do they enthuse about the purchase of Debenhams IP.

£600m is based on expectations Boo previously announced (as 1/4 of their expected annual revenue increase building back towards 25%). So things are far from in line with guidance from only earlier this year. Market has this all worked out. But not you.

On Boo getting good value for Debs, the article:

'More prosaically, both Topshop and Debenhams speak to value destruction as well as creation: put simply, both brands were worth more in their prime.

That they have been sold for relatively small beer (by way of comparison, VF Corporation bought Supreme a few months ago for $2.1bn) is not just a consequence of the shifting sands of buyer behaviour – or lack of vision on behalf of their respective proprietors – but also of businesses increasingly run for short-term return rather than long. A planning horizon typically antithetical to brand-building.'

Your brand expert has plenty of reservations about the acquisition.

Read the article T4G and it doesn't follow as a response to anything I wrote. I'm not questioning that intangible assets exist; but rather that in paying what they did for it, Boo overestimated Debs' intangible value by a very large amount.

Buying Debs was like buying a car that had already been written off and marked for scrap. There is no brand value in the name as a thought experiment shows: is it possible to imagine lots and lots of people thinking

"yes, I'll buy this on Debenhams' website, even though it costs more than somewhere else, because the Debenhams name and everything that connotes for me makes it worth paying extra"? Or,

"I'll have to buy this at Debenhams because it's available exclusively there and there only". Which could lead to...

"I'll pay more to buy this Debenhams branded thing because, even though I could buy a generic equivalent, the quality/prestige of owning the Debenhams item makes it worth paying a significant premium for".

Now run the same rationales but substitute for Debenhams, things like 'Armani', 'Harrods', 'Nike', 'Selfridges', 'Coca-Cola', or even John Lewis/M&S/Next/JD Sports. It's night and day and shows why talk of Debs' brand value is ridiculous.

Boo had cash on the hip and that's why they bought. Ditto the £70m splashed on the HQ. Too easy to spend rather than be prudent and plan ahead. That £125m should have still been on the balance sheet for a rainy day; but instead they're now a comparable amount in the hole with an interest-bearing revolver.

The pace of the turnaround in sentiment is hard to keep up with. Only the highest quality retailers (even more so for apparel) with proven track records are of investment quality. Everything else - so most stuff - looks set for a protracted slide over the near term.

Retreating to quality and safety will likely be the best strategy to make a return.

Decent? In line with previous guidance, would people say?

Now 40s look odds-on to me and somewhere in the 30s will be the true floor. That's unless the inside reality is that the business is already in trouble; or if the business is okay currently but hits real trouble within the a year or so.