Boohoo’s “differentiated brand portfolio offers significant growth prospects,” according to analysts at Peel Hunt, although they have cut their target price for the online clothing retailer to 100p from 140p, while maintaining an 'Add' rating on the stock.
Analysts at the bank expect the group's first half results, due at the end of this month, to be in line with previous guidance outlined in May.
Since May, the Peel Hunt analysts believe that there has been steady momentum for boohoo thanks to easing comparatives, a strong event-led consumer, as well as a normalisation of returns.
However, the important part of boohoo's results will be its outlook, and the analysts believe “the group’s £325mln banking facility and asset-backed balance sheet provide sufficient cover for a tough year ahead and the key distribution projects in train.”
Additionally, the analysts noted that next year will see boohoo’s “differentiated brand portfolio” and the benefits of this, offering significant growth prospects against the wreckage of the high street.
The Peel Hunt analysts noted that at the beginning of this summer, boohoo introduced a charge of £1.99 to return items and although this had little impact on the number of returns, it does open up the potential of roughly £8mln-£10mln in return income, as well as possibly making the Premier option of £12.99 for free next-day delivery and returns for a year more appealing to customers.
Despite consumer sentiment and macro conditions, boohoo is pushing ahead with opening its US warehouse, automating its Sheffield warehouse, and building out its Debenhams platform, the analysts added.
They concluded that while it is not going to be a “stellar period for the sector,” boohoo’s balance sheet should support it through the tough times, while the collapse of the high street gives it significant growth potential.