Shorters right???negative review of European online clothing retailers15 Oct 2022 15:38
Deutsche Bank chops Boohoo rating from 'buy' to 'hold' in negative review of European online clothing retailers
10:05 Fri 14 Oct 2022
Jon Hopkins
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Boohoo Group PLC
AIM:BOO
Boohoo label
The analysts said they see Boohoo facing more competitive challenges and noted that it has more "automation capex and potential disruption to come"
Analysts at Deutsche Bank have chopped their rating for Boohoo Group PLC (AIM:BOO) from 'buy' to 'hold' after slashing their target price to 36p from 140p in a negative review of European online clothing retailers.
The German bank's analysts said they see Boohoo facing more competitive challenges and noted that it has more "automation capex and potential disruption to come".
Looking at the sector, the analysts said: "Our view that online sales would return to structural growth after one year of post-COVID normalisation has been wrong. We underestimated the impact of inflation on the consumer, operating costs and valuations.
"The adages of 'profits being sanity' and 'cashflow being king' have become the order of business. Accordingly, business models are changing to reflect increased costs and the weaker consumer. The sales growth at all costs mentality has changed with increased attention being paid to cashflow and ROCE."
They concluded: "We expect to see lower sales growth, better gross margin management, a tighter control on costs and capex pared back."
The Deutsche Bank analysts reiterated 'buy' ratings on Germany's Zalando SE as "best in class", albeit with a lowered price target of €29, down from €42, and on ASOS PLC (LSE:ASC) given its "cheap valuation" but with a reduced target price of 900p, down from 2,900p.