Boohoo Q1 earnings preview: where next for Boohoo shares?
Joshua Warner June 14, 2021 6:33 PM
Boohoo has gone from strength-to-strength over the past year, delivering faster growth and pouncing on the opportunity to buy failed high street brands. But can the online fashion retailer keep up the momentum after warning that growth will slow and margins will contract this year?
When will Boohoo release its Q1 results?
Boohoo will release its first-quarter trading update on Tuesday June 15. This will cover the three months to the end of May 2021.
Boohoo earnings consensus: what to expect
The last year has been transformational for Boohoo. While the company has had to adapt quickly and had hurdles to overcome like virtually every other company, the pandemic has, overall, been hugely beneficial for the online fashion retailer.
Firstly, it has accelerated the shift to online shopping among consumers. Annual sales growth surged to 41% in the last financial year to the end of February 2021 from 27% in the prior year, before the pandemic hit.
Secondly, it has thinned out the market and given Boohoo the opportunity to capitalise on the weakness of its competitors by snapping up renowned brands at rock-bottom prices, having bought Debenhams in January and then the Dorothy Perkins, Wallis and Burton brands from failed Arcadia in February.
This adds firepower for Boohoo, which has found of rhythm of identifying brands that are failing on the high street before buying them and revitalising them online. In fact, Boohoo has said its newly-acquired brands will contribute around five percentage points of growth towards its target to deliver 25% of annual sales growth this year.
Having only been bought earlier this year, the contribution of its newer brands should be felt more acutely as this will be the first full quarter that Boohoo has owned them.
The headline figure for its quarterly results is sales. Analysts are expecting Boohoo to report quarterly revenue of £461.7 million, which would be up 25.5% from the £367.8 million delivered the year before, and in-line with its annual growth target.
Also watch margins. The profitability of its established brands is expected to hold steady this year but newer brands will dilute its overall margin by 50 to 100 basis points. Overall, it is targeting an adjusted Ebitda margin of around 9.5% to 10% this year. It has said earnings will be second-half weighted this year due to the strong comparative period it will come up against in the first half following the boom in demand when the pandemic erupted.
Notably, the slower rate of growth and dip in margins this year will erode its position over rival ASOS. ASOS is a larger business, but Boohoo has been delivering superior growth and margins over recent years. Notably, ASOS has also been snapping up failed businesses after buying the Topshop and Miss Selfridge brands from Arcadia.
Boohoo has not provided any guidance for this year beyond its topline growth and margin targets due to the uncertainty going forward, but investors will hope for a more buoyant outlook after it warned in May that the lower levels of returns, which has boosted margins and sales, will start to unwind and that carriage and freight costs were rising at significant rates.
Where next for the Boohoo share price?
After consolidating at the start of the year, the Boohoo share price has been forming a series of lower highs. 300p has recently offered support with the price rebounding off this level at the start of the month.
The price is attempting to retake the 50 & 100 sma which are both flat. The MACD showed a bullish crossover keeping buyers hopeful.
Any recovery would need to retake 350p the May high, which could open the door to 365p the April high before 378p the yearly high comes back into play.
On the flip side, failure to retake the 50 & 100 sma could see Boohoo shares slip back towards 300p.
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