The reasons why Boohoo is in a strong position than its fast fashion rival ASOS have been outlined by experts. The analysis comes after both companies suffered a challenging end to last week as they revealed their struggles to keep shoppers spending.
Manchester-headquartered Boohoo posted its first ever drop in UK sales while ASOS warned that its profits this year could fall to £20m, down from more than £190m in the prior 12 months. Both companies experienced a surge in demand during the height of the Covid-19 pandemic but look to be finding it harder to maintain those levels of interest from potential customers.
In analysis sent to the Manchester Evening News, experts at Panmure Gordon have had their say on how Boohoo, despite its recent troubles, is still in a better position than its closest rival.
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They said: "While issues remain with delivery lead times for non-UK businesses that somewhat undermine the fast fashion appeal, more importantly the back-end of the business appears to be adjusting towards a more realistic position than ASOS.
"The near doubling of inventory days at the year-end is being reined in and the returns-related opex mitigated.
"We just feel that Boohoo is more commercial than ASOS, although the alternative view is that ASOS is encountering the same issues six months after Boohoo. Both companies need to demonstrate stabilisation of cashflows after big post-Covid outflows, albeit Boohoo's is in our view more related to investment.
"Investment-wise we continue to believe that both have stronger long-term prospects than traditional mixed-channel retailers but both will remain at subdued valuation levels until the wider market starts to look through the current monetary tightening cycle."
They added: "ASOS seems to us to need to control their inventory, which is disappointment but doable. Boohoo continues to invest and is actively containing its working capital, making it our preferred UK virtual."
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