Earnings

Boohoo’s share price: What to expect in half-year results

The Leicester sweatshop scandal and the appalling treatment of workers still casts a long shadow over Boohoo’s [BOO] share price and upcoming half-year results.

Boohoo’s share price suffered from a huge sell-off in July, following publication of the revelations. Unsurprisingly, investors weren’t keen on backing a youth-orientated fashion brand that exploited workers in the UK.  

In recent days, the release of an independent review has seen Boohoo come in for more criticism, yet it has also provided hope that the online retailer is now addressing the issue. Investors, at least, seem willing to bet on this, with Boohoo’s share price climbing 15.44% on 25 September.

With sales likely to have seen a boost as more people shop online due to the coronavirus, will Boohoo’s half-year results maintain the stock’s upward momentum?

 

When is Boohoo reporting earnings?

30 September

 

What could move Boohoo's share price?

'Leicester sweatshop' scandal update

The first week of July saw Boohoo's share price tank 43% as revelations emerged of low pay and poor working conditions in Boohoo's Leicester garment factories.

An independent review commissioned by Boohoo, but led by Alison Levitt QC, found that the accusations were “substantially true” and criticised the clothing company for "weak corporate governance".

In response, Boohoo has since set out steps to improve conditions at the factory, including new independent directors. The online fashion retailer will be hoping that the report and its subsequent action are enough to repair the damage done to its business. Following publication of Levitt’s report, Boohoo's share price climbed 11% as it looks to make up lost ground.

"Overall, we see the results of the review as being broadly in line with our expectations, and think the changes being called out represent further steps forward on the path to rebuilding investor confidence in Boohoo's social responsibility," JP Morgan analysts said.

“Overall, we see the results of the review as being broadly in line with our expectations” - JP Morgan analysts

'Robust' Q2 trading?

In Boohoo’s last earnings update, the retailer said trading between the middle of March and early April saw a "marked decrease in year-on-year growth". While this is likely down to the coronavirus, Boohoo said things improved in April before a “robust” performance in May. Shareholders will find out just how robust it was in the upcoming results.

M&A activity

Another area to watch out for will be Boohoo's M&A activity. In the last quarter, it said it had raised £197.7m "to take advantage of numerous M&A opportunities that are likely to emerge in the global fashion industry over the coming months."

This follows the retailer picking up Oasis and Warehouse for £5.25m in the first quarter. How these two recent pickups are adding to the top and bottom-lines will be of interest to shareholders.

 

Where next for Boohoo’s share price?

Boohoo expects revenue growth of 25% for the full financial year, with an adjusted EBITDA margin of 9.5% to 10%. Any signs that the company is on track to achieve this will provide investors with confidence and likely boost Boohoo’s share price, although the retailer has cautioned it is trading in a period of increased customer uncertainty.

"The strength of our trading and operational performance in the period further underpins our confidence in our medium term guidance for 25% sales growth per annum and a 10% adjusted EBITDA margin, which remains unchanged," Boohoo said in its Q1 update.

Boohoo’s share price could see a post-earnings boost if it follows through on promises of operational strength and proper corporate governance. Among the analysts tracking the stock on Yahoo Finance, Boohoo's share price carries an average 371.07p price target, and hitting this would see a 0.92% upside on the current price through 25 September’s close.

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