- Boohoo Group
- 22 December 2021 14:06:29
Source: Sharecast
The broker said Boohoo’s recent profit warning was not just a result of the global supply chain logjam but also over-optimism baked into the guidance for the second half of 2022.
"We believe the inflated supply chain costs and weakened delivery proposition will persist for the next 12-18 months, and we therefore cut our FY’22- 24E earnings estimates by more than 40%," it said.
"Our view is that there will be an industry-wide permanent rebasing of supply chain costs at a higher level after the pandemic. We also believe boohoo will need to invest behind prices and marketing to recover lost ground in US and Rest of Europe.
"We therefore estimate EBITDA margin remaining below the 10% target until FY’27E. The increased returns rate brings in an added element of concern around product quality, but we continue to believe in Boohoo’s long-term potential, and see a path for recovery to the medium-term growth targets as we think the rapid growth of Shein in the US may be in boohoo’s favour in the long-run."
Liberum said it was "excited" by the developments at Debenhams, where the opportunity is substantial.
"Trading at only 0.6x FY’23E EV/sales and 7x EV/EBITDA, we think the shares offer good long-term value."