Boohoo shares set to rebound after UK supply chain scandal

Boohoo shares continue to rebound effectively following its UK supply chain scandal and allegations about pay and conditions at Leicester city factories selling clothes to the firm.

The online fashion retailer saw its share price fall close to 50% after the scandal was made public, with the stock falling to a low of 210p in mid-July.

Since then, however, the stock has been on a tear, climbing 54% since its mid-July low and looking capable of returning to its pre-scandal highs of more than 400p in the weeks ahead.

Boohoo closed 2% higher on Monday at 324p per share, with the stock up 8% year-to-date (YTD), which means it continues to outperform the broader market, with the FTSE 100 still 19% down YTD.

Analysts believe Boohoo will 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 15%.

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.

Boohoo remains well-positioned over high street rivals

Despite the online fashion retailer’s recent scandal, the company is still better positioned than many of its high street rivals, which are struggling amid the coronavirus pandemic, with its share price still capable of making significant gains.

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 14% 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.’

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