(Bloomberg) -- Boohoo Group Plc’s (LON:BOOH) latest trading update shows the online fashion retailer has been a big winner during coronavirus lockdowns that closed the U.K.’s shopping streets.
A 45% sales increase in the three months to May 31 crushed the consensus analyst estimate for 15% growth, while the stock rose as much as 11% to an all-time high, extending its year-to-date gain to 43%.
The update showed that even when non-essential stores are forced to shut, people still want to update their wardrobes, particularly those among the younger audience targeted by Boohoo. The company predicts that sales will grow about 25% for the current financial year at a time when many brick-and-mortar rivals are seeing their business slump.
“What pandemic?” Bernstein analyst Aneesha Sherman asked in a note. A 60 basis-point improvement in gross margin during the quarter was unique to the sector, she said, citing “lower markdowns than usual, with good demand and a highly responsive supply chain.”
For Boohoo, the struggles of many retailers in recent months have become an opportunity. The company on Wednesday announced the purchase of the online businesses and all associated intellectual property of the Oasis and Warehouse brands for 5.25 million pounds ($6.6 million).
“The deal adds two very well-known mid-market brands to Boohoo’s growing platform,” wrote Jefferies analyst Andrew Wade, who has a buy recommendation on the stock. The acquisition is “a low risk and likely high returning opportunity, one that provides further evidence of the long-term potential in Boohoo’s multi-brand platform.”
Not everyone is so enthusiastic. According to RBC Capital analyst Sherri Malek, further investment is required to enhance the company’s service proposition, “which lags peers, particularly internationally.” The stock’s valuation “also prevents us from being more constructive,” wrote Malek, who has a sector perform rating on the stock.z
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