Does Boohoo.com Have Anything To Cry About?
Spreadex | Jan 05, 2018 10:04
By Boohoo’s standards, 2017 could be classed as a bit of a disappointment. Now, the stock still ended up climbing 40% across the 12 months, from £1.34 to £1.87, and has since risen to a current trading price of £2.12. However, that’s still a way off the levels hit in early June, where it struck an all-time high of £2.72, and late September, when it briefly hit £2.62.
What’s the reason the stock suffered such a sharp decline in the final quarter of 2017 then? Well, investors took poorly to the end of September’s interim results – so poorly in fact that Boohoo plunged 17% on the day of the release, before steadily slipping to an 8 and a bit month low by the start of December.
The thing is the figures themselves were damn good. For the 6 months to 31st August revenue rocketed 106% to £262.9 million – breaking down as a 43% increase for boohoo to £181.8 million, a 289% surge at PrettyLittleThing to £72.7 million, and an £8.4 million contribution from Nasty Gal – with pre-tax profit climbing 41% to £20.3 million. It even raised its guidance for full year revenue growth, from 60% to 80%.
Yet investors instead chose to focus on the company’s falling profit margins. Gross margin for the group was 53.3%, down from 55.3% at the same point the year previous as Boohoo invested in pricing, promotions and advertising.
In terms of next week’s statement, investors will be keeping an eye on those margins, while expecting big things from the festive period revenue-wise. Advisory firm BDO reported that online sales in the week up to Christmas Eve rose a whopping 40% – if Boohoo can get even a piece of that pie then investors should be happy.
Boohoo.com plc (LON:BOOH) has a consensus rating of ‘Buy’ alongside an average target price of £2.29.
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