Deutsche Bank cuts Boohoo price target after profit warning

Deutsche Bank cut its price target on Boohoo on Friday to 230p from 370p after the fast fashion retailer warned on full-year profits a day earlier.

"Boohoo hit us with a surprise profit downgrade on the basis of lower sales outside of the UK, largely because of a combination of consumer demand and a relatively unattractive delivery proposition as well as higher costs due to higher returns and freight," DB said.

The bank said freight costs of £17m were unusual given the trends have been quite obvious over the last six months and the higher returns rate largely driven by mix was arguably to be expected.

"These sales and margin pressures may be temporary but will largely stay in place until conditions normalise," Deutsche said. "It is unclear why the returns rate should not normalise more quickly with product mix so we assume some recovery in margin for FY23E."

The bank cut its FY22 and FY23 adjusted estimates by around 35%. However, given the share price fall predicting some of these concerns, it retained its ‘buy’ rating on the stock.