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Stock of the week: Boohoo

Joanna Faith
Written By:
Joanna Faith

Ian Forrest, investment research analyst at The Share Centre, picks Boohoo as stock of the week and says hiring Primark’s chief operating officer should boost the online retailer.

Recently earning a place on our recommended shares to ‘buy’ list, online retailer Boohoo has appointed Primark chief operating officer John Lyttle as Boohoo Group chief executive, a decision heralded by industry experts as a clever move.

During his eight-year tenure at the Associated British Foods-owned value retailer, Lyttle has helped spearhead its global expansion, including launching in the US three years ago and rolling out stores in Spain, France, the US and Italy, as well as in the UK and Ireland.

Boohoo already sells clothing in over 100 countries and its portfolio comprises of brands PrettyLittleThing and NastyGal. Bringing a wealth of experience, the hire is likely to boost Boohoo further as it continues its growth story.

When the company was floated on the stock market in 2014 it was valued at £560m, and is worth about £2bn as of April 2017. The company is currently investing in enlarging and automating its warehouse in Burnley so that it can cope with sales of £3bn.  Boohoo’s numbers look positive for the year so far, with sales and profits steadily increasing.

First quarter figures in June showed the strong sales growth continuing into the new financial year with revenues up 53% to £183.6m. That included 49% growth in the UK and 75% in the US. The company said it expects full year revenue growth of 35-40%.

The shares have outperformed the market since the company floated in 2014. A dip over the past month, due to concerns over possible short-term disruption caused by PrettyLittleThing’s move to a new warehouse, provides a better entry point for investors. While there is no dividend at present as any spare cash is being invested in the business or acquisitions, the stock has long-term growth potential.

We recommend the shares as a buy for medium to high risk investors seeking growth due to the company’s strong growth record, helped by the general move by consumers to online shopping, and potential for further growth.