logo-loader
viewBoohoo Group PLC

Boohoo still offers "blue sky" for Barclays

The bank’s analysts upgraded the shares as they said the supposed risks of a slowing in core brands have been “exaggerated”

Boohoo Group PLC -

Boohoo PLC (LON:BOO) shares are not cheap but Barclays analysts believe the online fashion retailer will continue to grow fast and this means the stock is “not that expensive”.

Having undertaken a proprietary survey of more than 1,000 women around the UK, Barclays saw lots of positives around the company that indicates that it hasn’t missed the boat as it upgraded the shares to ‘overweight’ from ‘neutral’ with the target price hiked to 380p from 310p.

READ: Boohoo delights City with “another standout performance”

While the shares currently trade for 35 times forecast earnings, admittedly “not optically cheap”, Barclays said “on a growth-adjusted basis, they are not that expensive, and if we look at upside/blue sky earnings scenarios, which we see as quite credible, they offer good value”. 

The bank’s analysts argue that risks of Boohoo’s core brands slowing in the UK “are exaggerated” and in fact that collapses of other high street retailers in the last year or so has created “headroom” for Boohoo, removing anywhere from £500mln to £2bn of capacity out of the apparel and footwear market.

Boohoo’s recent acquisitions of Karen Millen and Coast “can unlock significant value over time”, the analysts reckon, even if they don’t grow as fast as some previous additions. 

Most importantly perhaps, Barclays reckons Boohoo’s abnormally high returns are sustainable due to its 100% private label policy, charging of delivery fees, and possibility of lowering input costs. 

As for concerns about the environmental damage from ‘fast fashion’, Barclays noted that Boohoo is starting to address this with the hiring of a sustainability director and introduction of sustainable ranges, but that the survey revealed it is not yet a priority for most consumers. 

“We do recognize there is a risk that consumers will start to care sooner than expected, and/or that it will take Boohoo longer to change perceptions.”

Quick facts: Boohoo Group PLC

Price: 316.4 GBX

AIM:BOO
Market: AIM
Market Cap: £3.69 billion
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Red Rock's Andrew Bell outlines next steps for exploration at its Luanshimba...

Red Rock Resources PLC's (LON:RRR) Andrew Bell tells Proactive London what's in store as far as phase two of exploration at its Luanshimba licence in the copper belt in the Democratic Republic of Congo, near the Zambian border. Red Rock will do pitting and trenching on the licence and then...

59 minutes ago

2 min read