Home Business News Boohoo rallies but still faces big challenges

Boohoo rallies but still faces big challenges

by LLB Reporter
10th Mar 22 11:01 am

Boohoo has had a horrific past 12 months with its share price falling by nearly 75%. It has suffered a few nasty profit warnings centred around slowing growth, and it is still trying to convince the market that its corporate governance standards are improving, through better monitoring of its supply chain and not getting its clothes made in sweatshops.

In December it moaned about customers sending more of their orders back, disruption to moving goods around the world, and ongoing cost inflation. Supply chain issues continue to bite, and higher return rates look set to stay, at least in the near-term.

Full year sales growth of 14% is at the top end of the 12% to 14% range provided in December. This provides some relief to the market that life hasn’t got worse for the company and might explain why the shares have rallied on the news.

“Fast growth has been the name of the game for Boohoo for so long. The rhyme might have to change given the financial pressures on consumers from rising inflation,” said AJ Bell’s Russ Mould.

“With food and energy bills taking up a greater proportion of its target market’s take-home pay, there will be less money available for discretionary spending such as buying a new dress from Boohoo.

“Consumers who found themselves on furlough during the pandemic got a wake-up call about the need to have more money in savings and not to be reliant on debt. Hopefully the nation is getting better at forging positive personal finance habits, but that doesn’t work in Boohoo’s favour if its customers are now thinking twice before buying an item of clothing they may only wear once and then chuck.

“The company’s growth expectations were pared back after last year’s profit warning, and it is hard to see Boohoo achieving anything above low double-digit sales growth this year at best.

“A bigger concern is how Boohoo will cope with cost pressures

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