Online fast-fashion retailer Boohoo (LSE:BOO) has grown massively in the past five years. I think the FTSE AIM-listed share is currently priced low and believe now could be a good time to buy shares. Looking at the current Boohoo share price, I am tempted. I believe with recent acquisitions, Boohoo could be gearing up for the next stage in its growth journey.
Fast fashion, faster growth
Founded in 2006, the UK-based online retailer has become hugely popular with its target market of 16-30 year-olds. It offers its own-brand fashion clothing and sells over 30,000 products across multiple brands.
Over the past five years, the Boohoo share price has risen due to the massive growth. To provide some perspective, net profit has grown from £8.4m in 2015 to £64m for 2020. Boohoo also benefited from the pandemic. Many traditional retail outlets closed their doors and Boohoo’s sales jumped. Boohoo has had a habit of buying failing labels and folding them into their business. This has allowed it to grow its brand and diversify its offering. Recent acquisitions include Debenhams, Warehouse, and Dorothy Perkins.
Boohoo share price journey
In the past five years, Boohoo’s share price has increased by over 620%. The past 12 months has seen the Boohoo share price underperform in my opinion.
The Boohoo share price has been affected by allegations of poor working practices. It was accused of using dubious suppliers and the working conditions were reported to be controversial to say the least. In addition to this, competitors have begun to catch up to its growth. Furthermore, the pandemic has forced many traditional retailers to invest in their own online platforms.
Despite these negatives affecting the Boohoo share price, I do believe things are on the up. As I write this, Boohoo shares are trading for just under 350p per share. This is still nearly 8% higher than this time last month. I expect this upward trajectory to continue.
FTSE AIM opportunity
I believe the Boohoo share price is well priced enough to tempt me to invest. The reasons behind this are also linked to the next chapter of its journey. Boohoo is now in a position whereby it is no longer a startup. It possesses a market capitalisation of £4.5bn. This makes it one of the largest listed retail businesses in the UK and it is still only listed on the FTSE AIM. With this level of market cap, it must reach a certain level of maturity and conduct itself in a certain manner operationally. I believe this is happening.
One step it has taken to show me it has matured is that of cutting ties with controversial suppliers. In addition to this, it is investing heavily in warehousing and office spaces and is planning to open its own factory in Leicester. This new initiative will surely help it manage demand and take itself to the next level to fulfil demand related to its new acquisitions.
There is always going to be the spectre of mistakes made recently that could affect the Boohoo share price. In addition, competition will always be attempting to grow, which could affect Boohoo.
I am, however, optimistic about the long-term outlook for Boohoo and its investment viability and would buy shares at its current price. Another stock I like is Tesco — I think it could be another good opportunity.