Boohoo and THG Group shares have imploded: buy the dip?

Boohoo (LON: BOO) and THG Group (LON: THG) shares have imploded in the past few years, costing investors billions of pounds. THG, formerly known as The Hut Group, tumbled to 50.75p, its lowest point since January 2023. It has dropped by over 93% from its all-time high.

Boohoo, on the other hand, crashed from a high of 433.6p in 2020 to the current 29p, bringing its market cap to over £363 million.

Why THG Group shares slipped

THG Group is a top e-commerce company founded by Matt Moulding. It owns brands in the beauty and nutrition industry. Its beauty brand comprises popular companies like LookFantastic, Cult Beauty, and Dermstore. It sells thousands of products to customers in the UK, Europe, and the US. 

THG also owns a nutrition business whose leading brand is MyProtein, which manufactures and sells protein powders, supplements, minerals, and vitamins. 

Additionally, THG Group owns Ingenuity, a brand that builds and manages websites for companies in the beauty and retail businesses. 

THG Group’s recent performance is a sad situation because the company rejected a buyout deal from Apollo Global in 2023, noting that the offer undervalued the brand. It also rejected approaches by a Belerion Capital and King Street Capital consortium. Nick Candy’s investment company also approached the company.

THG Group’s performance brings memories of other companies that rejected buyout offers and then tumbled. The most notable is Entain, which rejected a $11 billion offer from MGM. Today, the company is valued at over £4.7 billion. 

THG Group’s stock has retreated because of its ongoing challenges across its top segments. The most recent financial results showed that its revenue for the year’s first half rose by just 2.2% to £911 million while its gross margin slipped by 20 basis points to 42.4%. 

The firm attributed the slow growth to major headwinds in the nutrition segment, especially its MyProtein brand, whose revenue dropped to £299 million. This slowdown was partially offset by its beauty and Ingenuity brand. 

THG Group’s adjusted EBITDA improved slightly to £52.3 million, helped by its decision to exit loss-making brands and reduce its workers. Its free cash flow was a £128.5 million loss.

Therefore, while THG Group’s share price is cheap, fundamentally, the company is facing substantial challenges that will affect its business. 

THG Group share price analysis

The daily chart shows that the THG stock price has been in a strong downward trend. It crossed the important support at 56.15p, its lowest swing in April this year. It has also dropped to the key support at 50.75p, its lowest level in April last year. 

THG remains below all moving averages and has formed a head and shoulders pattern. Therefore, the path of the least resistance for the stock is bearish, with the next point to watch being at 45p. This view will be confirmed if it drops below the support at 50.75p.

Boohoo chart by TradingView

Boohoo Group has tumbled

Like THG Group, Boohoo has been another highly troubled British retail and technology company. A winner during the pandemic, the stock has dropped by over 93%, costing investors billions of dollars.

Boohoo’s troubles started when media outlets reported about its poor working conditions in Leicester. 

After that, the firm started dealing with substantial competition from Chinese brands like Shein and Temu, which benefitted from low production costs. Shein, which was started a few years ago, is now valued at over $70 billion.

Boohoo has seen its revenue growth continue slowing down while returns increased. Its most recent financial results showed that its Gross Merchandise Value (GMV) dropped by 13% in 2024 to over £1.8 billion.

Its revenue did worse, falling by 17% to £1.46 billion. As a result, Boohoo, a profitable company, started making losses. Its annual loss rose from over £90 million in FY’23 to £159 million in the last financial year. 

Unfortunately, there are signs that its business is still not doing well this year. Data by SimilarWeb shows that Boohoo’s website traffic has fallen in the past few months. It had 9.7 million visitors in August, down by 7.47% from the previous month.

It has also changed its US strategy by saying that it would start shipping its orders from the UK. That is a sign that its US business was not doing well to support its warehouses.

Boohoo share price analysis

BOO chart by TradingView

On the weekly chart, we see that the BOO stock price has barely moved in the past few years. Its past attempts to bounce back have found substantial resistance slightly below 50p. The stock has remained below the 50-week moving average while its volatility has stalled.

Therefore, the stock will likely remain in this range in the coming weeks. A drop below the key support at 26.24p will point to more downside, with the next point to watch at 20p.

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