Boohoo and ASOS shares set to outpace high street rivals

Boohoo and ASOS have consistently provided strong returns for investors amid the economic fallout from the coronavirus pandemic, with the pair seeing their respective share prices soar while its high street rivals struggle to cope with the myriad of headwinds hitting the retail industry.

ASOS shares continue to push on to reach higher highs this year, with the stock up more than 50% year-to-date. Boohoo meanwhile saw its shares hit a new all-time high of 413p in June and, despite those gains being eroded by its UK supply chain scandal, the stock appears to have recovered from the setback.

Boohoo closed at 304p on Monday after trading sideways throughout the day, while ASOS finished the first trading session of the week 1% higher at £50.36 per share.

ASOS upgrades full year guidance after resilient Covid-19 performance

Earlier this month, ASOS opted to upgrade its full year 2020 guidance, with the online fashion retailer expecting to deliver way more than previously forecast due to Covid-19 accelerating consumer trends towards online sales.

Revenue at the company is now expected to grow by between 17% - 19%, while pre-tax profit is forecast to come in between £130 million - £150 million.

‘The second half has been a period of tremendous change for ASOS, we have made real progress and shown resilience through the period and are exiting the year in a strong position,’ ASOS said in its latest trading update in August. ‘We have a robust balance sheet, with a differentiated product offer and global infrastructure to leverage.’

‘Against this backdrop we have increased confidence that ASOS will continue to progress as one of the few truly global leaders in fashion retail,’ the company added.

Looking ahead for ASOS, the consumer and economic outlook remains uncertain and it is unclear how long the current favourable shopping behaviour will persist.

The recent trading dynamics will deliver full year 2020 sales and profit ahead of market expectations and further support strong underlying cash generation this year.

However, the extent of this outperformance and any impact beyond this financial year will be driven by how customer shopping behaviour normalises.

Boohoo bounces back and could hit 372p in 2020

Analysts covering Boohoo have echoed investors’ sentiment, with their average 12-month price target for the online fashion retailer sitting at 372.50p per share.

Based on where the stock closed on Monday, analysts average price target implies a potential upside for Boohoo of 22%.

However, given the pace of Boohoo’s recovery in the wake of its scandal, you could forgive investors and analysts for believing the stock will push on to higher highs in 2020 and beyond.

Therefore, despite downgrading its share price target from 500p to 345p in the wake of the UK supply chain scandal, analysts at Goldman Sachs were the most upbeat among their peers, with its earlier assessment potentially achievable if Boohoo can maintain its momentum moving forward.

ASOS and Boohoo well-positioned to outpace high street rivals

Online fashion retailers like Boohoo and ASOS have proved far more resilient to the Covid-19 crisis than their high street rivals, which have struggled to make meaningful gains this year.

High street fashion retailers meanwhile have performed dismally in comparison to their online counterparts, with Next, Hennes & Mauritz (H&M) and Zara-owner Inditex all down more than 12% year-to-date.

Online fashion is set to triple this year, accounting for around 23% of all European sales in 2020, with the shift away from the high street accelerated by the viral outbreak, according to analysts from Bernstein.

‘The sudden closure of all apparel retail stores across all major global markets has shaken up the channel mix in an unprecedented way this year,’ Bernstein analyst Aneesha Sherman said in a note. ‘[It's] five years' worth of growth achieved in about six months.’

How to trade stocks with IG

Looking to trade Boohoo and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

1. Create an IG trading account or log in to your existing account
2. Enter ‘Boohoo’ in the search bar and select it
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade