Analysts at Berenberg downgraded fast fashion retailer Boohoo from ‘buy’ to ‘hold’ on Tuesday and slashed its target price on the stock from 140.0p to 45.0p, stating the group was now “fighting on all fronts”.
Berenberg said as with many other companies in the e-commerce space, Boohoo’s shares have had a “particularly difficult” 2022. While the analysts still believe the group has “invested significantly” in improving its economic, social and governance credentials following reports of failings in its Leicester supply chain back in July 2020, more recent reports regarding working conditions at its Burnley distribution centre will likely make “a sustained revival” in investor sentiment “increasingly difficult”.
“Clearly, the most important consideration is the well-being of those affected by the conditions reported in the Times article. Nevertheless, we also believe the investigation represents a setback to any sustained improvement in investor sentiment looking ahead,” said Berenberg.
The German bank added that the 2023 trading year was also set to be “a challenging year” from a margin perspective, with the group expecting an adjusted underlying earnings margin of 3-5%, driven by cost inflation and operating de-leverage.
“Considering this alongside our expectations for continued subdued financial performance in the near term, we downgrade our price target to 45.0p and our recommendation to ‘hold’,” said Berenberg.
Reporting by Iain Gilbert at Sharecast.com