Flipping Boohoo @ $433m for 2x out of Bankruptcy

🧠 The Takeaways

Today we’re waiting + placing a stalking horse big for Boohoo Group and out of Bankruptcy we’re going to:

1. Consolidate then sell 90% of the brands.

2. Clean up/get all brands on 1 tech stack to save millions.

3. Gut 50% of the product catalogs

+ Breaking down Drew’s 🔥🔥 Tweet thread that everyone at scale should track as well.

Let’s Community - Drew is spitting 🔥🔥🔥.

Today’s newsletter is heavily inspired by Drew Fallon’s recent Twitter thread on how bad Boohoo’s stock is doing. I won’t summarize it, but if you want to read it, check it out here.

The real callout from the thread is 3 metrics he pointed out that I see no brands measuring and are the actual keys to understanding performance.

1. Revenue Model

2. Gross Margins vs. Product & Delivery Costs

3. Productivity per Employee.

1) Rev model

Whoever runs growth needs to have this math down cold.

Basically, this is the sophisticated version of Traffic x CVR x AOV but with one major add on ( discounts + sales tax). 

Don’t run your math based on your pure topline numbers. Keep your other costs in mind before you get to (true) COGS which inform your real Gross Margins.

2) Understanding Gross Margin vs. Product & Delivery Costs

No matter where you put Delivery (i.e., fulfillment) in your P&L, you need to calculate the trend over time related to your Product costs. General note: most brands put Fulfillment in COGS.

Controlling costs is the path to success in 2025. 

Your 2 largest costs outside of Ads are Product + Fulfillment costs.

I can’t tell you how many brands I see who don’t track both independently. Every quarter, you should be pushing your Product and Ops team to push down your costs on each side as much as possible. 

Track it ruthlessly. That’s where the real profits come from.

3) Productivity Per Employee

Revenue/Employee is a garbage metric that doesn’t mean anything.

If you want to understand whether your team is actually getting more efficient over time, you should be tracking:

Productivity per employee = Gross Profit - Salary per employee.

This chart is the perfect example of how misleading Rev/Employee can be. 

When you actually account for the employee cost (which has also skyrocketed L5), you see a much different picture of how well the biz is doing. Think of this as the Contribution Margin, but for Employees instead of Marketing dollars.

We need more content like this in the game. Everyone needs to know their real numbers better.

Let’s Examine This Biz

Note: As always, none of what follows is legal, tax, investing, financial, or any other sort of advice. I’m not a current investor in Boohoo Group. And I was never here 😉.

Boohoo Group, The Portco of 13 British Fast Fashion brands like Bohoo, PrettyLittleThings and Nasty Gal is dead. They just don’t know it yet. 

Trading at $31.06/share with a $433m market cap, this biz is -90% L5. They’re stuck being too cheap for Luxury and too expensive for Teemu.

This biz is the 2010’s DTC PE dream. 13 Digitally native Fashion brands that play well on social/with influencers and had strong unit economics. Their Portco consists of:

• Boohoo (and Boohoo Men)

• PrettyLittleThing

• Nasty Gal

• MissPap

• Karen Millen

• Coast

• Oasis

• Warehouse

• Dorothy Perkins 

• Wallis

• Burton London

• Debenhams

They essentially built an ETF of SMB/Mid-Market British Fast Fashion brands. And it was going amazing for them. Until it wasn’t.

Financial Summary

TLDR Analysis:  Immediate Bankruptcy Watchlist ⚰️

• Rev falling -17% YoY is painful. 🤧

• Gross Margins @ 52% = barely passable for Public fashion brands. 😰

• OPEX cut wasn’t enough. OPEX as a % of Rev actually went up. 🫣

The leading indicators aren’t any better:

• Customers -10% YoY

• Orders -13% YoY

• Order frequency -3% YoY

• AOV -3% YoY

Every metric is heading in the wrong direction. This biz is toast.

Watching Forced Contraction (intentionally getting smaller) is like watching a slow implosion. 

It’s painful, looks like death, and every step forward looks like a nosedive off a cliff. Boohoo didn’t really have another choice, but still you hate to see it.

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Let’s Fix This Biz!

Here are the 3 ways we’re going to harvest what we can post bankruptcy and flip it for $1B.

1) Carve Out and Consolidate 90% of the group

Consumer Brands (DTC, eCom whatever you want to call it) cannot be stacked on top of each other in a portfolio like Real Estate.

It’s not how the biz model works or how there is value unlocked in this market. 

Brands need to be directly nurtured and invested in creating a unique element that other’s won’t benefit from. 

The best example of how bad this is: Boohoo and Boohoo Men’s are treated as 2 separate brands.

Looking through their earnings, you can see there are only 5 brands that matter.

Phase 1: Sell off Everything that isn’t a crown jewel.

If we peel back the layers here, which unfortunately Boohoo doesn’t disclose, there will be 3 brands that matter.

1. Boohoo (including Boohoo Men)

2. Pretty Little Thing

3. Nasty Gal

These are the 3 actual brands (not marketplaces/retailers) that drive the core of the group.

Want to know how I know? Because their the only home pages that aren’t plastered with 75%+ off sales.

Phase 2: Sell off the good assets.

Debenhams (Retailer) and Karen Miller (Brand) look like good legit assets. Maybe Karen Miller gets folded into one of the jewels, but Debenhams doesn’t fit the new “Brand”-driven model.

Selling these off should provide enough cash to stabilize the biz + recoup most of the bankruptcy acquisition price.

Phase 3: Consolidate/shut down Dorothy Perkins, MissPap, Oasis, Coast, Warehouse, Wallis, and Burton into 1 brand, then sell it off.

If you look at their sites, they’re all using the exact same template and running the exact same strategy. Instead of managing 7 heavy discount sites at 7-8ish figures, convince someone to run 1 at ~$100m.

There are probably 1-3 absolute money pits that someone inside Boohoo doesn’t want to shut down because people will lose their jobs, but those brands are DOA anyway.

Takeaway: Great brands are like Trees. They need room + resources to grow tall.

2) Get. 👏 Their. 👏 Tech Stack. 👏 in Order. 👏.

All of these bizs kept their tech stack from when they were acquired. Every brand has their own. It’s a mess. Defeating the purpose of consolidating assets and backends through M&A.

• Boohoo and Nasty Gal are on SFCC

• Pretty Little Things is on Magento

• Debenhams is on Custom

No wonder their OPEX is 48% of their Rev. This step is simple. 

1. Gut

2. Cut 

3. Then Gut again.

The brands we keep are all going on 1 platform. 

If it doesn’t make sense for them all to be on the same platform, it’s a great sign they aren’t meant to be in the same portfolio.

I’m partial to Shopify, but just get all the brands on one platform, with one team supporting it and optimize around that.

It won’t just save on platform fees + dev costs, but also all the support around it. Literal Development costs + IT, Ops, Marketing, CS. Everything will get more efficient.

Without diving too deep into the numbers, I’ll estimate we’ll save Boohoo $10-20m/yr in direct platform/dev fees + unlock another $20m in potential new sales from moving faster.

For all the Shopify lifers it’s hard to imagine, but on these big, cumbersome platforms (especially 3-4) even simple site updates (like a holiday promo) can take months & $10k+.

Always streamline the vendors. The extra bells and whistles are nice, but every add on slows you down. The weight of that many tools will eventually crush you.

Takeaway: Get down to 1 streamlined tech stack.

3) Dump 50% of the Product Catalogs

The problem with every modern Marketplace/Digital retailer is that their data isn’t as good as Meta’s. They’re misses in inventory investments is actually what’s sinking this brands. 

And if they’re still relying on human curation…

I don’t even have to look at the product catalogs to know that the 80/20 rule governs their success.

I can guarantee you they’re wasting way too much $$$ on the 80% of products that aren’t driving the big bucks.

It’s a constant growth problem the bigger brands get. They mistake “more” with “better.”

The narrative is always the same:

1. Higher growth targets

2. “We need more product”

3. We need more diversity because I’ll get fired if we bet the farm, and it doesn’t work.

4. We proportionally order, but spread our cash out across too many products.

5. We get stuck with slow-moving inventory and have to discount.

Then you end up where Boohoo is today: The Discount death spiral. We’ve talked about it a lot with other bizs (LuluLemon, Overstock). This is how it always starts.

The real solution: Do the proper research to understand the products customers want to buy, and make big, concentrated inventory bets.

I can’t tell you how many distressed bizs I’ve looked at where the founder didn’t want to give up on the 50% of the catalog accounting for 20% of sales that were incredibly slow-moving and required steep discount. Aka killing profits.

Liquidate what isn’t selling and reinvest every dollar back into what is. It’s the only way to claw out of the spiral.

Takeaway:  Always streamline your catalog.

Final Thought

The greatest challenge every Western Digital Retailer will face is they became the middlemen they set out to disrupt. Boohoo Group is the perfect analogy.

20 years ago, it was all about disrupting Big Box Retailers with their terrible experiences + margins.

DTC was born.

Fast forward to today, China is going Direct From Manufacturers at the lowest price possible, and the middle man has become the Western biz owners/employees who’s SG&A costs are their opportunity.

While everyone is wasting their time talking about AI displacing jobs, this is the one I’m actually most concerned about for our industry.

The same way boomers + their parents aspired to own a biz on Main St. Shopify has always been the “Opening the store on main street” equivalent for the modern generation.

Now, Chinese manufacturers are fully operating like US stores at a fraction of the cost crippling the traditional digital retail model that Boohoo, and many other brands, were built on. 

I have been, am, and will continue to be heavily brand-focused. Retail is a terrible biz model, and Marketplaces are so much harder to nail than people think.

There’s just so little margin and money in selling other people’s products at this point. 

If you’re in eCom you have to build your own brand. It’s the last competitive battleground.