The boohoo (LSE:BOO) share price hit some glorious highs during the pandemic. Young consumers used retail therapy to good effect to soothe their boredom. But was this the crescendo for the seismic growth story of fast fashion? I feel it could be.

Since the New Year, Boohoo’s share price has been slashed by more than half (65%). I think the fall is indicative of the sun setting on the fast fashion growth story. I anticipate companies like boohoo becoming the sector’s biggest casualties over the long run. Yes, I no longer consider boohoo a growth stock, and I will detail why.

Is the party over?

Fast fashion is exactly what it says on the tin. The sector is built on constantly churning out cheap, trendy clothing inspired by celebrity culture. The fashion is ‘fast’ because it is delivered at breakneck speed to the consumer.

However, the ‘fast’ nature of it is being challenged now. The churn of the speedy delivery is becoming more expensive. This is because high freight and container costs have been eroding gross margins. Meanwhile, the delivery times for the goods have extended.

Frankly, I feel this undermines the whole business model. And all the while, customer returns are increasing. These factors are the bane of an online retailer. Clearly, they have been the bane of the boohoo share price, too.

Analysts at UBS seem aligned with me regarding the sector’s challenges over the long run. The bank has forecast revenue declines of up to 30% over the next five years for the sector.

Long-term outlook for the share price

Of course, I could be wrong about the direction of the boohoo share price. The company has rather bullishly been on an acquisition spree recently. The spree has armed the Group with several brands that cater to slightly different customer segments. A diversified business model will never be a bad move in my eyes.

Reassuringly, the company also has a relatively strong balance sheet. Financial resilience is what this company will need. I am pretty sure the cost-of-living challenge will see a sharp cut back on fast fashion spending from young consumers.  

However, the most tantalising part of boohoo’s upcoming interim results this Wednesday will be its outlook. I expect to see its management strike a cautious tone regarding the medium-term prospects.

What the interim results will not highlight

Most pertinently, I believe there is a separate issue putting pressure on the boohoo share price. This relates to charges of ESG malpractice against the company that have been lingering for some time. I am seeing it have an effect on the tastes of young consumers. The sarcastic reaction on social media to the Group’s appointment of Kourtney Kardashian as its sustainability ambassador does not bode well with me as a potential investor.

I understand this is an issue boohoo is trying to mitigate. However, its efforts have landed them in hot water with the authorities regarding greenwashing before. ASOS too.

Certainly, I see changes in consumer behaviour as being more powerful than companies’ ability to respond commercially. I think this, combined with the operational challenges, will continue to weigh negatively on the boohoo share price.

Overall, I must conclude fast fashion shares have no place in my portfolio for the foreseeable future.

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Henry Adefope has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Over the last 12 months of trading, boohoo shares are down 81%. They are currently trading at 57p, down 86% from the all-time high price of 413p set in June 2020. But is the latest investor interest in the firm a sign of a turnaround or is the company a value trap at current levels? Let’s find out. 

Overseas interests 

Any time a large investment firm acquires a stake in a falling stock, I tend to look at it as a long-term play. And Citadel’s interest does not come as a surprise to me. boohoo has been increasing its presence in the US, which is its second-fastest growing market after the UK.  

In fact, sales in the region grew 4% in 2022. However, the biggest roadblock that boohoo’s expansion in North America faces is its lack of distribution centres there. And with rising fuel prices, shipping costs have multiplied for e-commerce businesses. In the last year alone, boohoo saw a £26m increase in shipping costs. And this has led to inflated prices in the region.

The board already has plans underway to establish a physical distribution centre in the US. And I think Citadel sees this move as a fix that could open up a huge market for the company in the country. A distribution warehouse in the US would reduce shipping costs which in turn could reduce product prices.

While I think this is a promising move for the company, is it enough to trigger an explosion in the boohoo share price? I think not.

boohoo share price outlook

Looking at the performance of boohoo shares over the last year, I think investors see glaring holes in the business. While sales increased last year, the company’s revenue has dropped steadily over the last four quarters. While a lot of this can be attributed to inflationary pressures, the company’s valuation has been dropping too. 

At their highest point, boohoo shares were valued at £5.2bn. At the current share price, they are valued at just £721m. And the company also recorded its first fall in sales volume in the UK last month. 

The group’s adjusted earnings before interest, taxes, and amortisation (EBITA) fell 28% last year to £125.1m. And the revenue margins dropped to 6.3% in 2022 from 10% in 2021. Despite this, boohoo is on an acquisition spree. The firm spent £261.5m on brands like Debenhams and building infrastructure for growth. This brought down net cash to £1.3m from £270m in 2021.

This looks to me like shaky financial grounds for a business wanting to expand fast. And the group expects lower sales for 2022-23 as well, citing pandemic-related concerns as the driving factor. 

The group is already looking to cut down on inventory size and implement cost-effective sourcing to reduce losses from the high volume of product returns that most fashion brands are facing today. But with inflation running rampant, I think September’s interim results will be subdued as well.

Yes, the long-term growth prospects for the brand are still attractive. But because of the economic turbulence right now, I do not see boohoo shares exploding after the Citadel purchase, which is why I am steering clear of the online fashion brand at the moment.

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An unfashionable stock

boohoo (LSE: BOO) is one of the UK’s biggest fashion retailers. The online fashion retailer had already been 30% down this year, but plunged a further 12% after it released its FY22 results. Nonetheless, it’s managed to recover most of its post-earnings loss since then.

The firm had already been starting to see a slowdown in sales growth due to “Significantly longer customer delivery times as a result of the pandemic”. Nevertheless, its new distribution centre in the US is expected to go live in mid-2023. With next day and two-day express delivery options available, this could help ease the supply chain constraints that boohoo is currently facing, and help the stock price.

However, with inflation continuing to weigh on consumer spending, I expect sales growth to continue declining. Management shares my sentiment too, as guidance for FY23 is for low-digit revenue growth. Expensive freight costs have also impacted its bottom line as the firm saw its profit margin decline from 5.2% in FY21 to -0.2% in FY22. For that reason, I won’t be buying this stock for now.

In the eye of the storm

The unfortunate events of the Russia-Ukraine skirmish has battered the Ferrexpo (LSE: FXPO) share price. Commonly known for being a high-dividend yield stock, the stock is now trading at 65% off its all-time-high.

The Ukraine-focused firm faces a large amount of uncertainty given the ongoing war there. Any further escalation might run the company out of business as its mining operations are located just east of Kyiv, where it’s more susceptible to Russian attacks. Additionally, China’s city-wide lockdowns have driven iron ore prices down. This will inevitably impact Ferrexpo’s top line in the near to medium term. Most importantly, the firm decided to defer its dividend payments. The board said that it will continue to assess the situation in Ukraine and make a decision on dividends when appropriate. With many investors initially buying the stock for its dividend, this is a stock I’m avoiding.

Getting the boot

Aside from sky-high inflation, Dr Martens (LSE: DOCS) will also have to worry about the recent retail sales figures. Although positive for the month of April itself, retail sales for the three months to April fell 0.3% as high inflation hurt purchasing power. That’s one reason why its stock is down 50% this year.

The majority of the firm’s revenue stems from the Americas and EMEA region. With inflation continuing to spiral out of control, this doesn’t bode well for Dr Martens’ near-term outlook. As central banks in these regions rush to raise interest rates, its debt levels start to become even more alarming. The firm has a debt-to-equity ratio of 140%, a declining free cash flow, and higher operating expenditure. These aren’t factors that are favourable when I invest in UK stocks, especially in a high interest rate environment. As such, I’ll be looking to purchase other shares with much more favourable fundamentals.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The boohoo (LSE: BOO) share price has collapsed by more than 73% over 12 months, making it the second biggest faller in the FTSE AIM 100 index. Do the online fast-fashion retailer’s difficulties mean I should stay away? Or do growing sales make boohoo shares a value investor’s dream at penny stock levels?

Let’s explore whether I’d buy boohoo stock today.

Why boohoo’s share price could rise above £1 soon

Despite recent struggles, there are signs the boohoo share price could be bottoming out. Since touching a 52-week low of 63.32p on 7 March, the shares have staged a recovery over recent weeks and now trade above 90p.

Growth in net sales for the three months to the end of February hit 7%. Additionally, the Manchester-based group expects adjusted EBITDA of £125m for the latest financial year. I’m keenly awaiting the company’s preliminary results on 4 May, which could prompt upward movement in the boohoo share price, if targets are hit.

In further positive signs, company insiders snapped up 130,670 shares over the past 12 months. Non-executive director, Iain McDonald, bought over £300k of the company’s shares at 103.1p each, suggesting insiders see value in boohoo stock at current prices. Total insider ownership currently sits at 24%. This creates strong incentives for good performance.

The fashion e-commerce market has grown consistently over the past five years. Many analysts expect this trend to continue. With a recent expansion into five Asian countries and an enviable list of brands to its name, including Nasty Gal, PrettyLittleThing, and Debenhams, Boohoo could be well positioned for a brighter future.

Headwinds for the shares

boohoo shareholders have become accustomed to bad news since the company was rocked by allegations of poor labour practices in 2020. Factory workers in Leicester were earning as little as £3.50 per hour according to The Sunday Times.

boohoo’s troubles don’t end here. Supply chain bottlenecks and increased freight costs have hit the retailer’s profitability. Moreover, it has faced difficulties in recent months as customer returns have increased. The company expects this to continue for some time.

Longer term, the shares also face intensified scrutiny from ESG-conscious investors. According to IHS Markit, the fashion industry is responsible for 8%-10% of global greenhouse emissions. And 60% of fast-fashion garments are estimated to end up in landfill within a year of purchase.

Finally, boohoo faces stiff competition from other online retailers, such as ASOS. Following a move from AIM to the London Stock Exchange‘s Main Market earlier this year, ASOS is eyeing a promotion to the FTSE 250. boohoo shareholders will hope the company’s fortunes change soon as it battles to retain market share.

Should I buy now?

Investing in boohoo isn’t risk free. The company has a history of repeatedly disappointing investors. However, with the share price in pennies, the stock does look particularly cheap to me at present.

With insider backing, improving corporate governance and a new ‘Ready for the future‘ collection made from recycled materials, I think better days could be ahead. I’d add some boohoo shares to my portfolio as a higher-risk play while the share price still looks like an attractive value proposition.

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Charlie Carman does not own shares in any of the companies mentioned. The Motley Fool UK has recommended ASOS and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Coating its pockets

The first thing I look at before I invest in any company is its balance sheet. boohoo’s balance sheet is rather healthy, with a 10.4% debt-to-equity ratio and enough cash at £70m to make up for its £50m debt. Its assets also sufficiently cover its liabilities, which is always a good sign. However, boohoo has taken on debt in its most recent half while also having its cash position cut almost in half. According to management, this was done to offset an increase in capital expenditure (Capex) as the company invests more in facilities to scale its growth prospects.

boohoo growth

boohoo reported that its net sales were up 10% in its most recent quarter. Active customers, orders, and order frequencies all saw an increase as well, but with that also comes a fly in the ointment. For starters, all regions bar the UK saw declines in growth. This was due to “Significantly longer customer delivery times as a result of the pandemic”, as international sales are fulfilled through its UK production line. But although customers and orders continue to grow, the average order value and items per basket have seen a decline, thus impacting quality earnings.

Moreover, boohoo has been experiencing declining annual sales growth. Its growth rate has seen a steady decline from 48% in 2019 to 41% in 2021. Furthermore, its profit margin has gone down from 5.5% in 2019 to 3.1% in its latest half. This shows me that the retailer is struggling to keep up with rising costs as inflation continues to run rampant. Primarily, carriage, freight, and labour have seen the biggest uptick in costs, with the AIM company expecting the drag to continue for the rest of the year. Nevertheless, investors will be hoping that the new US distribution centre set to open in 2023 will help ease the firm’s current supply chain constraints.

Nevertheless, investors will be hoping that the new US distribution centre set to open in 2023 will help ease the firm’s current supply chain constraints.

Hoo’s the future?

On the one hand, boohoo’s exciting ventures into the NFT and metaverse space could be a game changer if it succeeds. Its aggressive marketing strategy also shows the firm’s commitment to grow its sales numbers. Not to mention, it is investing more in automation in order to offset rising labour costs.

On the other hand, boohoo does face strong headwinds. Sky-high inflation has forced central banks to increase interest rates, and this has had a stifling impact on companies’ growth prospects. People are less willing to borrow and spend money at higher interest rates. This is evident in the latest GDP figures, which showed a decline in economic growth. The latest retail sales numbers did not look very promising either, showing a contraction.

While the boohoo share price looks reasonable at its current valuation, declining sales growth, spiralling costs, and a stalling economy, do not justify the opportunity cost for me to invest in boohoo. Therefore, I do not see this as a favourable climate for me to buy the shares for my portfolio.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Undervalued opportunity

The current Boohoo share price is 93p. At this price, the stock trades on a price-to-earnings (P/E) ratio of just under 20. This might not seem cheap, but I still think the shares may hold some great value, especially when considering the future growth of the company.

As my fellow Fool Rupert Hargreaves points out, Boohoo has seen earnings grow at an average of 46% per year for the past seven years. If we assume the firm can continue to grow at a more conservative 10% for the next 10 years, it would hypothetically report earnings per share of about 15p in 2032. Assuming this, if the stock were to achieve industry average multiples — around 13 for the online fashion retail space — it could be worth 195p. This theoretical growth seems very enticing to me.

Looking at Boohoo’s close competitor H&M, I also see value. H&M trades on of a price-to-sales (P/S) ratio of 1.23, which is over double the Boohoo P/S ratio of 0.6. This further backs up my thesis that Boohoo’s shares may be undervalued.

Headwinds for the Boohoo share price

Although the share price does look cheap, there are a few concerns I have moving forward. The most pressing concern is some of the workers’ rights issues that have surrounded the firm in recent years. For example, in 2020, a Guardian report highlighted workers creating Boohoo garments being paid well below minimum wage. While the firm has recently taken steps to prevent such activity, these scandals have undoubtedly left a stain on the Boohoo brand name.

Another risk that I see affecting the share price in the short-to-medium term is the threat of rising interest rates. Both the US and the UK raised their rates last week to 0.25% and 0.75% respectively. When rates rise, investors tend to dump higher-risk growth stocks such as Boohoo. As the trend towards rising rates continues, the Boohoo share price could slide further.  

What I would do now

In my opinion, the current price does look cheap to me, especially considering it’s down over 70% from a year ago. However, if there’s one thing I’ve learned throughout my retail trading career, it’s that facts always trump hypotheses. While the shares might look cheap on paper, the risk of rising inflation and the branding scandals are both concrete factors. Therefore, I won’t be buying any Boohoo shares for my portfolio today.  

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Does a massive 36% jump in the Boohoo (LSE: BOO) share price over the last five trading days (to yesterday’s close) mean the worst is over for battered and bruised shareholders like myself? Although I’m only whispering it as things stand, I believe it is.

Chinks of light

Perhaps the most obvious reason for the sudden uplift in shareholders’ fortunes is the unexpectedly positive trading update released by the Manchester-based business earlier this month.

As a reminder, net sales growth of 7% was logged for the fourth quarter. This rises to 14% for the year to the end of February. That may seem rather low for a former market darling. However, one needs to remember that Boohoo was a major beneficiary of global lockdowns. It was somewhat inevitable that performance would moderate. Many other listed firms would likely welcome such numbers with open arms.

It wasn’t all rosy. The company saw higher return rates in Q4 compared to the same period in the previous year. And while trading continues to be reliably strong at home, international performance has been held back by supply chain pressures. Consequently, customers have been waiting longer for their clothes to arrive.

So, has the Boohoo share price bottomed?

There are certainly a few reasons for thinking that the worst might be over.

Boohoo now expects to report adjusted earnings before tax, interest, depreciation and amortisation (EBITDA) of roughly £125m. Importantly, this is in line with the (revised) guidance set by management last December. In other words, expectations are now matching reality. On top of this, a P/E of just 16 looks too low for a company that now boasts 13 or so brands, solid finances and plenty of social media savvy.

At no point have I ever believed any of Boohoo’s existing problems to be permanent either. Supply chain issues will be smoothed out, helped by a new US distribution centre in 2023. Concerns over the working conditions in factories will also be laid to rest. This is assuming, of course, that the company follows through to the letter on its commitment to address previous oversights.

Shorters attack

It’s important to put things in perspective though. Despite rising strongly in the last few days, the Boohoo share price is still over 70% below where it stood this time last year. That’s an awful lot of ground to make up, even if a resolution to the crisis in Ukraine does light a fire under UK stock prices.

Perhaps tellingly, the AIM-listed company remains a target for short-sellers (those betting the Boohoo share price will fall) according to shorttracker.co.uk. Some of this pessimism may be due to the company already stating that higher return rates are expected to continue for the first half of the new financial year. The rise and rise of competitors such as Shein might also be playing a role. Higher living costs and the subsequent squeeze on discretionary budgets can’t be helping either.

Turning point

Notwithstanding this, I’m increasingly confident that the last few days may represent the turning point in Boohoo’s fortunes.  A lack of news until full-year numbers are officially confirmed (4 May) could see some profit-taking, but I won’t be selling a single share. I reckon we’ve already seen the bottom. 

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

ESG concerns

The firm’s business model rests upon the speedy design, production, and advertising of its products – fast fashion. This allows high volumes of garments to be created for low costs to the consumer. While this may sound promising on paper, Boohoo has been embroiled in numerous worker scandals as a consequence.

For example, in September 2020, a report by the Guardian indicated that workers at third-party suppliers were earning well below minimum wage in addition to enduring poor working conditions. The firm was also subject to a class-action lawsuit after being accused of misleading advertising in the US. In my opinion, these are some of the key reasons why investors have turned sour on Boohoo shares.

Another headwind Boohoo is going to have to contend with in the coming months is the threat of rising inflation. As prices rise across the world, it could pose a serious risk to Boohoo’s low-cost, high-volume operations. And supply chain issues have already impacted the firm, leading to 10-day delivery times to the US, which is a vital sales region for Boohoo.

In addition to this, the 2021 Q3 results, released in December 2021, have highlighted that the firm’s pre-tax margin outlook has been lowered from 9% to 6%. Factoring in tax, these margins will shrink further. Falling margins lead to reduced profitability which is the last thing Boohoo needs.

Reasons to be cheerful about Boohoo shares

Yet one reason that Boohoo shares do appeal to me, is the fact that the firm owns a pretty impressive arsenal of brands. It acquired a number of these retailers out of administration in 2021, the largest of which was Debenhams. In addition to this, its US distribution centre is expected to open in 2023, significantly expanding operations in the region. The US contributed to a quarter of revenues in 2021, so this seems like a great move to me.

Couple this expected future growth with the current price-to-earnings ratio of just 9.3, and Boohoo shares do look attractive to me. Perhaps the current share price could offer me a discounted entry position for future growth.

What I’m doing now

Yes, Boohoo shares are cheap, and the firm has some exciting plans ahead. However, I think that short-term rising costs could place a huge strain on the firm this year, especially considering its low margins. In addition to this, the ESG concerns are a big moral red flag for me. Therefore, I won’t be adding Boohoo shares to my portfolio any time soon.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Boohoo (LSE: BOO) share price fell an astonishing 66% in 2021. Today, I’ll take a closer look at what happened and why the market has seemingly fallen out of love with the fast-fashion giant.

It all started so well

Holders of this stock must have been being optimistic as they entered 2021. At the beginning of last year, the Boohoo share price was riding high at 340p.

An encouraging trading statement in January went some way to justifying this momentum. Strong growth across all its brands and geographies in the last third of 2020 was reported. Accordingly, the company raised its guidance on full-year revenue. News later in the month that Boohoo had snapped up a number of brands, including Debenhams, was also positively received.

In March (and facing a potential US import ban), Boohoo was once again forced to defend its supplier practices. The AIM-listed firm published a list of 78 approved manufacturers as part of its ‘Agenda for Change’ programme. After a slight dip, the share price duly recovered, helped by news of a new warehouse that would boost sales capacity to above £4bn.

The Boohoo share price starts to tumble

It’s at this point that cracks began to appear. Helped by the rise in online shopping over the pandemic, full-year results in early May showed a 41% jump in revenue to £1.75bn. A 37% rise in core earnings to £173.6m was also reported.

Away from the headline numbers however, Boohoo said the the benefits of reduced returns seen over the pandemic would now lessen, but higher costs were here to stay. The company’s decision to maintain guidance in June’s trading update (despite sales rising 32% in Q1) also pointed to management becoming increasingly cautious on the firm’s near-term outlook. 

As the months passed, a significant minority of investors appeared to be growing frustrated with the company’s founders. No less than 12% of shareholders opposed the re-election of Carol Kane to the board. A statement that the online fashion retailer would be investing £500m in the UK over the next five years did little to appease owners.

The worst was yet to come. In September, the Boohoo share price fell sharply as it warned that previously-highlighted higher costs in its supply chain and higher wages for its workers would impact margins. This was followed by a lowering of full-year guidance in December’s (unexpected) trading statement. As expected, more clothes were being returned by customers. A serious slowdown in sales abroad, issues with deliveries, and ongoing cost inflation were also blamed. Omicron wasn’t helping matters.

Boohoo briefly became a penny stock when, in mid-December, the shares dipped to 97p. They had not been this low since September 2016. Perhaps the only crumb of comfort to holders was that industry peer ASOS was also ending the year firmly out of favour.

More news soon?

As things stand, analysts believe earnings per share will fall by 23% in the current financial year. This would leave Boohoo’s stock on a P/E of 20. Whether that proves to be a bargain for long-term investors remains to be seen. 

Based on past form, the £1.5bn-cap may provide the market with another update on trading later this month. Should this be the case, The Motley Fool UK team will be on hand to update readers.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended ASOS and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Boohoo results

After the initial release of the results on 16 December, Boohoo shares plummeted over 25%. This was due to a reduction in the firm’s EBITDA and net sales outlook. However, the next day, the shares shot back up. I think this is because investors realised the results weren’t as bad as they seemed.

For the three months to 30 November 2021, gross sales rose by over a quarter. These sales also rose 58% and 102% compared to FY21 and FY20, respectively. These positive numbers have primarily been due to robust demand for products in the UK market. In addition to this, the business was able to largely increase its market share during the pandemic. Being an online-only retailer, customers flocked to buy Boohoo products as physical stores stayed closed.

I think this could play to Boohoo’s strength in the next few months too. With the recent news of the Omicron variant, the UK government is considering tightening restrictions. If this goes as far as another lockdown, it could help boost Boohoo’s sales yet again. I would also expect this to help the Boohoo share price keep climbing higher.

However, in the Q3 results, CEO John Lyttle highlighted the “disruption due to the pandemic” that was hindering growth in international markets. Although growth in the UK seems encouraging, Boohoo may struggle if it cannot boost its international demand. If growth does stall, I would expect the Boohoo share price to tumble further.

Share price concerns

The company still faces other challenges too. Boohoo has been in the spotlight continuously over the past year with multiple news stories denting its corporate reputation.

For example, a factory in Leicester that Boohoo was supplied by was reportedly paying workers as little as £3.50 an hour. In addition to this, the firm has been embroiled in a lengthy US lawsuit regarding fake advertising.

Both of these factors are also behind the disappointing Boohoo share price performance over the past year. Although the firm is making moves towards becoming more transparent and open, it can take substantial amounts of time to mend a damaged reputation. This could deter potential investors for years to come.

Another concern I have for the Boohoo share price is its value. Even after falling so heavily throughout the last few months, the price-to-earnings ratio is still very high at around 26. This seems expensive to me, even when considering the good results.

The verdict

For me, the Boohoo share price doesn’t look all that appealing. I think the results issued by the firm were solid, but many investors are worried about the ongoing effects the pandemic will have on the firm. In addition to this, trading at 23 times earnings, the share price isn’t exactly cheap. Therefore, I won’t be adding Boohoo shares to my portfolio any time soon.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.