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Boohoo share price: will the stock remain in fashion?

Boohoo share price: will the stock remain in fashion?

The Boohoo share price has surged by 69% year-to-date as the fashion house is in vogue.

The company had a solid start to this year, as revenue for the first three months jumped by 39%. It’s worth keeping in mind that the stockbroking firm Numis was expecting a rise of 38%. Boohoo maintained its first-year outlook, as it anticipates sales to grow between 25% and 30%. Gross margins were 55%, largely flat on the year, which was in line with forecasts. Net cash rose by 28%, and there was strong sales growth across all regions. 

Boohoo share price outperforms wider sector

The positive quarterly figures that were announced in June were followed by an upbeat outlook at the start of September, when the firm upped its full-year outlook. The previous revenue guidance of 25-30% growth for the first six months, was lifted to between 33% and 38%. Not many companies in the retail sector have lifted their guidance, so Boohoo stand out from the pack for the right reasons. The Boohoo share price hit an all-time high on the back of the upward revision to the guidance.

Last month, the group bought out Karen Millen and Coast for over £18m, and the firm’s cash reserves were used to finance the transaction. Boohoo’s strong performance has driven its desire to keep expanding, hence why it acquired the online business, as well as all the intellectual property rights associated with Coast and Karen Millen. Boohoo’s ability to acquire different brands has helped it to deliver for different audiences.

Online presence proves key for Boohoo

Boohoo is embracing the change in consumer habits, as more shopping is done online, and the online-only fashion house is going from strength to strength. Traditional retailers that have large operations on the high street are feeling the pain; higher wages, expensive rents, and costly business rates are common complaints.

The online business cuts out major expenses, but the company must run smoothly, otherwise it can be costly. ASOS is one company who found this out – a poorly executed ‘overhaul of the infrastructure’ caused major problems for the group. While the Boohoo share price continues to perform well, the ASOS share price has plummeted this year. The competition from Boohoo has played a part in this.

Wider retail sector hit by low consumer confidence 

Consumer confidence in the UK is running low despite the fact the jobless rate is at its lowest since the 1970s, plus earnings are respectable too. It seems that uncertainty in relation to Brexit has prompted consumers to hold back on spending, which is adding to the woes of the wider retail sector. The Confederation of British Industry’s realised sales reading dropped to -49 in August, which was the lowest reading since the global financial crisis. 

Consumers are becoming savvier, and that is where low-cost operators like Boohoo are gaining market share. Group’s like Ted Baker as well as Next are deriving an increasing amount of their revenue from their websites, so Boohoo will have to stay innovative to keep growing at its current rate. With Boohoo’s results out tomorrow, investors will be hoping the Boohoo share price continues to go from strength to strength.

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