Analysts at Peel Hunt were upbeat on the prospects for Boohoo Group PLC (AIM:BOO) after the fast-fashion retailer warned that supply chain issues would hit full-year profits.
Boohoo said its performance in the first half was being negatively impacted by several factors a £26mln increase in Covid related distribution costs, UK returns rates returning to pre-pandemic levels, physical stores reopening, as well as rising freight costs in its supply chain and wage inflation.
The broker instead noted the pick-up in trading in the second half and the “exciting” medium-term outlook.
Peel's analysts said any price weakness today should be seen as a buying opportunity and rated the shares a 'buy' into expected downgrades from other banks and brokers.
The broker cut its FY22 EBITDA estimate by 10%, but pointed out that “this is not about competitive threats or a drop in engagement” as customer KPIs remain strong.
On a p/e ratio of around 19 times, “further falls in boohoo’s share price makes this a compelling buying opportunity into peak,” the broker said.
“Margins remain sustainable at the 9% level over the medium term, revenue looks set to double over three to four years and cash generation remains outstanding.”