The Boohoo share price (LON: BOO) is up by 26 percent in the first 20 days of the year, reversing a strong bullish trend that had seen its value decline by over 70 percent in 2022. The current bullish trend comes amidst concerns about the company’s decline in its revenue.
According to reports, the company’s recent forecast expects a double-digit decline in revenue for the current financial year, as inflation-squeezed consumers cut back on buying clothes online and return to the stores that had been closed during covid lockdowns. The company is also forecasting a 12 percent drop in sales. Its earnings are also expected to go down as market conditions continue to worsen.
In its latest trading update, Boohoo reported a 13% decline in revenues to £637.7m in the four months to December 31st, in line with the company’s previous expectations. UK revenues declined 11% compared to a “strong” prior year, and all other regions declined, including the USA, which was down 17%. The company cited longer delivery times as affecting its position.
To address these challenges, the company is now seeking to control costs and is carrying less stock than a year ago to be as flexible as possible against an uncertain consumer backdrop. The company has also started outsourcing more garments closer to home markets to help tackle freight costs and delays.
Boohoo is also continuing to push for the US market, which it sees as the big growth market. Despite struggling in its efforts due to freight costs falling and cost inflation normalizing, Boohoo’s success in the USA market will increase its likelihood of recovering from last year’s 71 percent decline.
As seen from the above fundamental analysis, Boohoo continues to struggle despite its share price going up in the first 20 days of the year. Therefore, despite going up by over 25 percent this year, there is a high likelihood that we might see its value starting to drop as its financial situation starts to become dire.
Overall, based on the fundamental analysis above, I expect Boohoo’s value to resume its long-term bearish trend this year. There is a high likelihood that we might see it falling below the 30p price level.
This post was last modified on %s = human-readable time difference 12:12