Boohoo Group PLC (AIM:BOO) has been downgraded to 'hold' by Stifel, with the broker believing there is neither the profitability nor cash flow to support a 'buy' rating.
Analysts said they like boohoo’s strategy of owning a portfolio of brands and leveraging the group’s infrastructure and social marketing expertise.
However, declining sales in the UK and US, consumer confidence at low levels and macroeconomic headwinds mean the broker slashed its target price to 40p from 165p.
Looking forward, analysts believe that 2023 is unlikely to offer much relief.
Boohoo is expected to report its third-quarter results in January, with another 10% decline in sales expected and in line with guidance due to the bounce back of stores and Royal Mail strikes hampering deliveries.
Into 2024, a decline in discretionary spending, the online retailers' £1.99 returns charge and a consumer switch to second-hand or more sustainable purchases will continue to dampen consumer demand, Stifel said.