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Further Boohoo share price gains likely following strong Q1

CMC Markets

The Boohoo share price is likely to keep pushing higher on the back of the company’s strong first-quarter results.

In the three-month period, the firm posted a 45% increase in revenue to £367.8 million, despite the fact that trading in mid-March through to early April was mixed. Gross margin ticked up by 60 basis points to 55.6%. Boohoo predict this financial year will see strong growth in profitability and exceed market expectations.

The online fashion house confirmed it acquired the e-commerce divisions of the bankrupt brands Oasis and Warehouse for £5.25 million. The move sums up the trend in retail at the moment, whereby traditional retailers are struggling, while the online groups are outperforming. Boohoo has confirmed that capital expenditure this year will be £60-£80 million. The group is committed to its medium-term target of annual sales growth of 25% and a 10% rise in adjusted EBITDA margin.

Boohoo share price on a roll

The Boohoo share price has been on a roll recently, setting several all-time highs in the past few months, so that makes it stand out for a London-listed firm. In April, the online fashion house posted well-received full-year figures. Revenue rose by over 40% to £1.23 billion, which was a little above its raised guidance. Pre-tax profit was £92.2 million, which was a 54% rise on the year. The UK business still accounts for the majority of group revenue, but its revenue is growing at a slower pace when compared with the international division. The overseas unit now accounts for 45% of total revenue – and that diversification should mean it is not overly exposed to one market.

The Boohoo share price was jolted higher last month when it announced it was acquiring the remaining 34% stake in Pretty Little Thing. The company bought a 66% stake in the firm in 2017. The acquisition of the other 34% stake was funded through cash and shares. In the current climate, not many firms are expanding, so it says a lot about Boohoo that they went down the acquisition route.

Online operators in strong position

E-commerce was already becoming a big part of our lives, but the pandemic has accelerated the move, so the prospects are looking good for the online fashion company. The outperformance of tech stocks in the past few months has really stood out, as the firms were able to continue operating in the lockdown, and with Boohoo an essentially online-only fashion house, it should emerge from the pandemic in a strong position. On the other side of the coin, high-street retailers are likely to be under even more pressure, so no doubt Boohoo will take advantage of that.

Boohoo’s share price has been driving higher since late March, and if the bullish run continues, it could break above the 400p mark.

   


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