It is hardly a surprise that broker Peel Hunt has opted to downgrade Boohoo Group PLC (AIM:BOO)’s share price target considering the barrage of bothersome news emerging from the online fashion retailer today.
Alongside a strategic review of its operations that could culminate with a break up of the group, boohoo announced that its chief executive John Lyttle will be jumping ship after five years.
Boohoo also unveiled a £222 million debt refinancing, which in fairness Peel Hunt said “highlights the company’s balance sheet stability”.
What’s undeniable is that sales are lagging- total revenue in the first half of boohoo’s current financial year declined 15% year on year, while gross merchandise value (GMV) slipped 7%.
Peel Hunt said: “That is in keeping with expectations, if not market forecasts, following similar trading patterns at ASOS over the summer”.
Adjusted earnings of £21 million, however, drastically undershot the broker’s assumptions of between £28-£30 million.
For analysts, boohoo needs to focus on “the relevance of the younger fashion brands” like PrettyLittleThing. In contrast, Debenhams and Karen Miller “continue to perform well”, according to Peel Hunt.
Following Lyttle’s departure, Peel Hunt sees Debenhams chief executive Dan Finley as the ideal successor, “but either way, we see some heavy lifting required to inject growth back into boohoo”.
Peel Hunt placed a ‘hold’ rating on boohoo stock (following an ‘under review’ period) with a 35p price target.
Shares fell 8% to 29.5p on Friday.