RE: Price downgrade - Morgan Stanley6 Jan 2023 11:28
BOO's shares have plenty of long-term potential but investors also need to consider the company’s high levels of debt.
The cost of servicing this debt looks set to keep climbing too, as central banks raise interest rates to combat inflation. Such levels of indebtedness could also hamper the company’s growth plans.
I’m particularly worried about BOO's debts, given the uncertain market outlook in the short to medium term. The recovery in consumer confidence/spending could hit the buffers as the global cost-of-living crisis intensifies.
Profit forecasts at BOO are also in danger from rising labour and fuel costs. These could be big obstacles in 2023 as workers struggle to make ends meet and the war in Ukraine drags on. Retail margins are notoriously thin, after all.