The online fashion retailer, often in the shadow of fellow AIM superstar ASOS (LON:ASOS), has been in the doghouse since last September, the stock falling afoul of investors' sky-high expectations. Having risen from an opening price of £1.35 to an all-time high of £2.65 by the day of its interim results, Boohoo then plunged 17% in a single session despite a stellar set of figures.
(Source: Spreadex, 19/04/2018)
For the 6 months to the end of August revenue more than doubled to £262.9 million, while pre-tax profit shot up by 41% to £20.3 million. However, investors took umbrage with a sharp 200 basis points drop in gross margin, from 55.3% to 53.3%, fuelling the perhaps over-exaggerated market-decline.
Boohoo eventually closed out 2017 at £1.88; still a 39% increase across the 12 months, but way off the highs hit earlier in the year. And the stock hasn’t been able to regain its momentum in 2018, with another poor reaction to its January update helping send the company towards a 14 month low of £1.40 by early April. Boohoo.com PLC sits at a current trading price of £1.54.
Like in September, that January statement was again jam-packed with eye-watering growth, with a 100% surge in total group revenue to £228.2 million for the 4 months to the end of December. Boohoo even revised its full year forecasts higher, the firm now expecting a 90%, not 80%, increase in annual sales. Yet once again investors looked beyond these numbers to focus on the dip in gross margin, which slipped from 53.1% to 52.5% for the 4 months to the end of 2017.
For a while now investors have proven to be incredibly resistant to Boohoo’s big numbers, so it is going to be interesting to see next Wednesday whether the promised growth – that 90% rise in revenue to £570 million and a 35% jump in pre-tax profit to £42 million – can get people back on board, or whether the margin issues will continue to be a problem.
Boohoo.com (LON:BOOH) has a consensus rating of ‘Buy’ alongside an average target price of £2.46.
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