Credit Suisse downgrades Boohoo

The bank, which has cut its rating to ‘neutral’ from ‘outperform’, said there were “too many questions” hanging over the online specialist.

In particular, it pointed to high air freight rates and capacity – which Credit Suisse said it did not expect to normalise in the next couple of years – concerns about the US, and growing competition.

It said: “Opening a distribution centre has not resolved Asos’ losses in the US, and we are concerned the same applies to Boohoo, as the addition of import tariffs, central costs and a high degree of friction in the supply chain will more than offset stronger sales from an improved delivery proposition.”

On competition, the lender noted: “[Chinese fast fashion brand] Shein remains a very significant threat to Boohoo outside the UK, given its scale, marketing presences and simpler supply chain.

“We believe there will be increasing amount of regulation around human rights and environmental issues but it is uncertain whether this hinders Boohoo or reduces competition.”

As well as cutting its rating, Credit Suisse also reduced current year earnings before interest, tax, depreciation and amortisation margin assumptions to 3.5%, compared to guidance of between 4% and 7%, and slashed the target price to 80p from 170p.

“We prefer Asos and Zalando, which have also been similarly de-rated but we have greater confidence in their business models, cashflow and execution,” it concluded.

As at 1345 BST, shares in Aim-listed Boohoo where off 4% at 78.52p.