Key points:
- Boohoo shares are down 65.9% for the year. Have they bottomed?
- The company’s fundamentals do not support a rally higher.
- Still, the company could recover in future.
The Boohoo Group PLC (LON: BOO) share price has fallen 65.9% since the year started but has been trading sideways recently in what could be a temporary bottom. However, while there is hope that the sideways trading will give way to an upturned, the fundamental picture does not support a potential rally.
Therefore, BOO stock is more likely to continue falling after the sideways trend, but nothing is set in stone since the financial markets tend to have a mind of their own. For example, looking at the eCommerce fashion retailer, the company’s revenues fell 10% in the first six months of its financial year to £882 million.
Also read: A Guide To The Best Clothing Stocks To Buy.
The fashion retailer expects its annual revenues to fall by a similar margin. However, not only are Boohoo’s sales falling, but the company is also dealing with a rising number of customer returns due to the UK’s cost of living crisis. more customers are returning their purchases due to their lower disposable incomes as energy costs skyrocket.
Furthermore, Boohoo’s margins are falling as well as the company lowered its annual margin guidance to between 3% and 5% from the initial $5-7% range. The firm has also invested heavily in expanding its presence in the United States with its significant customer base. The company is facing another headwind in the form of rising competition from other brands like Shein.
Shein is a Chinese fashion e-commerce brand not subject to the same scrutiny that Boohoo faces in its home market. Therefore, the company can offer lower prices to its global customers since it can source them at much lower prices.
However, all is okay for Boohoo; the company is still extremely popular with UK shoppers and attracts millions of visitors every month. Moreover, the company is still popular among its target customers, mainly young people, which is unlikely to change.
Still, Boohoo is a respected brand and has taken steps to correct its past errors, and hopefully, the company shall recover in future. However, I need to trust the current bottoming pattern.
*This is not investment advice.
Boohoo share price.
The Boohoo share price has fallen 65.9% this year and seems to have bottomed. Is it a buy?