Boohoo ‘Fighting On All Fronts,’ Says Analyst

Boohoo (LON: BOO) has had a tough year, with its share price down more than 70%, continuing its downtrend, and no sign of any near-term positivity.

Even on Friday, it dipped over 5%.

The online fashion retailer has struggled as consumer shopping habits switched back to in-store at the start of the year before soaring inflation hit spending and the company's item return rate rose, impacting its results.

In addition, the overall market decline has also weighed on the stock.

The company has its own unique challenges as well, such as the reported supply chain issues and poor working conditions at a warehouse in Burnley. Furthermore, its Chinese rival Shein is continuing to gain market share, and the previous Arcadia Group brands and Debenhams, which Boohoo snapped up last year, have continued to make a loss under the online fashion retailer's ownership.

There doesn't seem to be a quick fix for the current headwinds Boohoo is facing, and in a note Friday, Stifel analyst Caroline Gulliver downgraded the company's shares to Hold from Buy cutting the firm's price target on the stock to 40p from 165p.

The analyst told investors in a note that while she fundamentally likes Boohoo's strategy of owning a portfolio of brands and leveraging its infrastructure, the declining second-quarter sales trend in both the UK and US “was a shock.” In addition, she has determined “that there is neither the profitability nor cash flow” in FY24 to support a Buy rating in the near term, the analyst tells investors.

Meanwhile, at the end of November, Berenberg analyst Michael Benedict downgraded Boohoo to Hold from Buy, cutting the price target to 45p from 140p. The analyst told investors in a note that Boohoo is “fighting on all fronts” and that reports concerning conditions at its Burnley warehouse will probably make a sustained revival in investor sentiment “increasingly difficult.”

According to TipRanks, out of 13 analysts, 10 have a Hold rating, and three have a Sell rating on Boohoo shares, with the average price target at 42.42p per share.