RE: Fresh warning over BOO24 Jan 2023 14:34
https://www.proactiveinvestors.co.uk/companies/news/1004069/boohoo-s-expansion-will-impact-profits-says-shore-capital-1004069.html
Boohoo’s infrastructure expansion will continue to weigh on profitability, according to analysts at Shore Capital.
The broker said it remains cautious about the online retailer’s shares following its update last week even with some positive developments, such as easing supply chain costs.
High return rates and delayed deliveries raised concerns about the competitiveness of its model, Shore Capital said, with the peak Christmas period suffering from challenging trading conditions.
Like its competitor ASOS, the weak consumer environment, inflation and return rate normalisation continue to act as headwinds.
In particular, the UK was impacted most by the postal strikes, which eroded consumers’ trust in on-time deliveries.
Shore Capital dished out some estimate changes too, with gross margins falling 190 basis points to 50.6% for the full year, as well as underlying earnings (EBITDA) falling by 8% to £62mln.
Looking ahead, Shore Capital views the next two years as critical, as it navigates a tough environment while simultaneously expanding its infrastructure with a weaker balance sheet.
Boohoo’s US warehouse should make the business competitive in that region, according to the broker, which represents a pivotal moment.
However, it sees no short-term catalysts in sight, and until there is an improvement in customer engagement, the broker has decided to keep its ‘hold’ rating on the stock