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17 Jun 2020 | 13:31

Liberum ups Boohoo price target after 'blowout' Q1

(Sharecast News) - Broker Liberum reiterated its 'conviction buy' rating on shares of Boohoo on Wednesday and lifted its price target to 500p from 490p after the fast-fashion retailer's "blowout" first-quarter update.

For the three months to the end of May, Boohoo reported a 45% jump in group revenue to £367.8m, with strong underlying growth across Boohoo, PrettyLittleThing, while newer brands MissPap, Karen Millen and Coast continued to trade strongly.

Liberum said that while the company has no doubt benefited from its main bricks and mortars competitors being closed, "it truly is a standout performance".

Boohoo also announced that it had agreed to buy the online businesses and intellectual property of Oasis and Warehouse from retail investor Hilco Capital for £5.25m in cash.

Liberum said it remains a big fan of Boohoo's M&A strategy, "as it continues to build an online 'house of brands' to expands its addressable population of fashion customers and grow its share of the global market, which remains low: UK 3.6%, Europe 0.3% and US 0.3%.

"We certainly expect more acquisitions as it utilises the recent circa £200m equity raise for M&A."

Liberum noted that Oasis and Warehouse focus on an older age category compared to Boohoo's core 16-24 year old demographic, adding to the existing offer and giving the opportunity to hold on to younger customers as they age.

"Our view on the announced acquisitions, just as with those in the past, is that they are decent brands, albeit in need of some rejuvenation, but where the costs bases had become far too large making the businesses unviable.

"Boohoo has the ability to strip these costs right down and leverage its own supply chain, infrastructure and systems."
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