The Boohoo share price crashed by more than 17% on Thursday after the company reported excellent half-year earnings but lowered its forward guidance. The BOO shares crashed to a low of 212p, bringing losses from the YTD high to 45%.
Why BOO shares are crashing
Boohoo is a fast-growing fashion company that targets the younger generation. The company sells most of its products online through its website and mobile applications.
The Boohoo share price collapsed after it issued a relatively soft guidance citing the ongoing supply shortages. In total, the company’s revenue in the first 6 months to 31st August increased to 975 million pounds. This was a 205 increase from the same period in 2020. At the same time, its gross profit rose to more than 533 million pounds while its adjusted profit before tax declined to 63.8 million pounds.
The shares dropped primarily because of the company’s guidance. The company expects that its full-year sales growth will be between 20% to 25%. The statement said:
“Elevated short-term cost headwinds experienced in the first half are expected to continue in H2 alongside recent freight inflation in our supply chain and wage inflation within our distribution centres. Consequently, adjusted EBITDA margins are now expected to be 9% to 9.5%”
Boohoo forward guidance contrasted that of H&M, the popular fast-fashion brand. The company recorded strong sales and hinted that its growth will continue. Similarly, on Wednesday, Next PLC delivered strong results and better guidance.
Still, many retailers are seeing strong challenges as they face rising costs as workers and transport prices rise.
Boohoo share price forecast
In my last article, I warned that the Boohoo share price could get cheaper soon. This prediction was accurate as the stock tumbled by as much as 17% on Thursday.
On the daily chart, the stock gapped lower and crashed to the lowest level since July last year. It also moved below the 25-day and 50-day moving averages and the key support at 215p, which was the lowest level on October 20.
Therefore, the Boohoo stock price will likely remain under pressure in the near term. Still, we can’t rule out a situation where bargain hunters rush to buy the dips in October.