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boohoo (LSE:BOO) Stocks have been in a tailspin over the past two years. However, the online fast fashion retailer is off to an exceptionally strong start to 2023 after plunging to a five-year low in December. The share price is up 42% this year, reaching 52 pence today.
as a feeling towards him AIM-listed company improves, could an investment in boohoo stock make me rich?
Here is my opinion.
Back to fashion?
boohoo’s business model was almost confined exclusively to the online world until last weekend. For the first time in the UK, the company launched a pop-up store in London to showcase its spring season collection.
The retailer previously experimented with a pop-up in New York in 2014. Additionally, by Karen Millen which is part of the boohoo group, briefly resumed physical trading in a temporary weekend store last month. And in 2021, he had opened a debenhams beauty shop in Manchester.
A foray into brick-and-mortar retail could be a shrewd move. Several consumer surveys indicate enthusiasm among the British public to return to shopping in the store after the online boom during the pandemic.
But jefferies Analysts have also highlighted that of boohoo “marked superior performance” on FTSE 250 rival ASOS regarding web traffic and app downloads in 2023.
Some sort of physical footprint coupled with renewed strength in its core online offering could be an attractive combination to fuel further growth in boohoo’s share price.
Reasons to be cautious
However, its cutting-edge focus on the water hardly represents much of a commitment to physical retail. And there are plenty of challenges that could derail the company’s strong progress this year.
Chinese competitor Shein has conquered the global fast fashion market. Shein is also boosting its UK in-person retail presence with pop-up stores next month in Bristol and Cardiff. This follows the company’s experience in Birmingham which coincided with the launch of boohoo in London. The battle for Gen Z consumers is heating up and boohoo will have to be nimble to stay in the race.
Beyond the competitive landscape, my main concern is based on boohoo’s latest financial results. In my opinion, they don’t seem to justify the recent rapid growth in stock prices.
Total revenue for the four months to December 31, 2022 fell 11% year-on-year to £637.7m. Additionally, the company expects its EBITDA margin for FY23 to be 3.5%. That’s toward the lower end of a previous forecast of between 3% and 5%.
Additionally, boohoo is facing backlash regarding compensation plans. The company intends to reward bosses with £175m in bonus payments if the share price recovers in accordance with a number of targets. Although Chairman Iain McDonald is confident that this rmyfully alignIn the interests of management and investors, many independent shareholders voted against the proposal.
Should I buy boohoo shares?
There are positive signs for boohoo after a miserable 2022. I particularly like the company’s ambition, albeit limited, to harness the potential of brick-and-mortar stores.
That being said, online retail remains its key focus, and I have yet to see enough concrete evidence that the business is on a sustainable path to recovery. Intensifying competition is a big concern.
As it is, I don’t think Boohoo stock is my golden ticket to getting rich. I expect full-year results to be released in May, but as it stands, I will look elsewhere for stocks with a better risk/reward profile.
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