The boohoo group is in a unique position but must choose acquisitions carefully

The boohoo group has announced a £200m share placing and intends to use the net proceeds of the placing to take advantage of global opportunities that are likely to emerge in coming months; Sofie Willmott, Lead Analyst aGlobalDataa leading data and analytics company, offers her view on this news:

The boohoo group is in a much more fortunate position than most other clothing & footwear specialists, significantly helped by its online only selling model which has left it free from most of the costly problems that many store operators are facing. The group has wisely shored up its balance sheet in preparation to choose its next acquisitions from the plethora of retailers that will fall to their knees over the coming months. The group must choose carefully as many of the brands that fail will have already been in trouble before the pandemic hit, with COVID-19 just accelerating their demise.

“Previously the boohoo group has bought smaller brands including Miss Pap and NastyGal and used its robust infrastructure to rapidly boost performance. However, the war chest it is developing hints that it has bigger ambitions to acquire retailers that are in distress and whose valuations represent a bargain. Like many of the recent deals we have seen, the group is unlikely to want to take on stores as part of the package and is likely to remain an online only player.

The group’s current portfolio of brands is heavily focused on young fashion and going out ranges in particular. The shift in demand caused by COVID-19 towards more home-appropriate outfits such as loungewear, activewear and nightwear will have highlighted the group’s reliance on social occasions to drive sales. In order to continue to grow rapidly, the group should focus on broadening the product range it covers through its future acquisitions to allow it to be nimble and adjust to changing consumer needs.”

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