The share price of online fashion retailer Boohoo has shown a remarkable recovery following a recent scandal involving poor working conditions in Leicester factories. Taking swift action, the company launched an independent investigation and took measures to ensure legal compliance in its supply chain. This decisive response has been well-received by investors, leading to a significant bounce back in Boohoo’s shares, with an increase of almost 30% on Thursday and a continued rise on Friday morning. As a result, the company’s market capitalization has been restored to £3.76 billion.

Investors have regained their confidence in Boohoo’s fundamental strengths, which has resulted in positive ratings from influential financial groups like Goldman Sachs and HSBC. While Goldman Sachs did reduce its fair price estimate for Boohoo shares to 345p, it still remains higher than the current market price. Similarly, HSBC has maintained its target price of 500p, indicating that the company still has the potential to regain its previous value.

Despite negative headlines that questioned Boohoo’s business model in light of the pandemic, analysts at Goldman Sachs and HSBC continue to believe in the demand for affordable fast fashion. They also emphasize that the impact of other websites removing Boohoo products from their platforms is limited, as the majority of Boohoo’s sales come from its own sites. This positive outlook, combined with the company’s proactive response to address the scandal, has bolstered the market’s confidence in Boohoo’s future prospects.

Sources:
Goldman Sachs
HSBC