Analysts at Deutsche Bank slashed their target price on clothing retailer Boohoo from 230.0p to 140.0p on Tuesday, stating the firm was set to see “more of the same”.
Deutsche Bank said the focus at Boohoo, which will report full-year results on 4 May, will likely all be on guidance for the 2023 trading year, where it expects management to strike “a more cautious tone” with regards to both sales progression and margin recovery in the period.
From an investor standpoint, DB said this may increase the “nagging doubt” that the Boohoo margin will stay at a level similar to competitor Asos as it follows “a similar pattern” of internationalisation of its distribution centres.
While the German bank believes this is largely built into the stock’s price, it noted a slowdown in sales growth may be “a bigger problem” as Boohoo has failed to achieve expected growth despite the current strong demand for occasion wear and going out dresses.
“We lower our earnings forecasts to reflect these concerns and our price target. We retain our ‘buy’ recommendation on significantly lowered forecasts and price target given the fundamental fair value but until Boohoo has its international distribution centres operational it may be hard for management to change the narrative,” concluded Deutsche Bank.
