boohoo.com (LSE:BOO) is an online fashion retailer listed on the FTSE AIM 100 index. I bought boohoo shares about a year ago as a long-term buy and hold strategy. With first quarter results due tomorrow, should I think about buying more? Is the company still a good investment for my portfolio? Let’s take a closer look.
First quarter results due tomorrow
The share price performance has been poor this year. Indeed, the price is down 20% in only the past week and has fallen 80% in the last year. It currently trades at 65p. What are the reasons for this?
The broader retail sector is being hit by the cost-of-living crisis, together with inflation and rising energy costs.
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All of these factors mean that many people simply have less disposable income to use to buy clothes from boohoo and other retailers.
Businesses, including boohoo, have been negatively impacted by these economic trends in very direct ways. For instance, the company has suffered from consistently high returns rates of clothes bought by customers.
As a current shareholder, observing this is rather disheartening. However, I didn’t buy boohoo shares to get rich quick. They’re a long-term investment and I’m refusing to panic, because I still think this is a quality growth stock.
First quarter results due tomorrow
The firm is due to release its first quarter results tomorrow. Many investors are hoping for low-single digit revenue growth.
Furthermore, the company is targeting an underlying cash profit margin of between 4% and 7%.
I’m also looking out for a reduction in return rates, together with more intact supply chains. These supply chains have been severely disrupted by the pandemic and have caused delays in manufacturing.
Given the recent wider economic problems, I think it may be unlikely that boohoo achieves all of these targets. Failure in this regard could lead to further falls in the share price.
Still a strong growth stock
Despite these shorter-term problems, a glance at the underlying financial results of the company reminds me that boohoo could still yield significant growth over a long period of time.
For the years ended February, between 2018 and 2022, earnings-per-share (EPS) rose from 3.3p to 4.56p.
By my calculations, this results in a compound annual EPS growth rate of around 6.7%. This is what I would expect of an AIM 100 growth stock.
What’s more, revenue has increased from £579m to £1.9bn over the same time period. While past performance is not necessarily indicative of future performance, I still believe the company can succeed over the long term.
Overall, while I won’t be adding to my position any time soon, I still believe in the firm. The imminent results could lead to further falls in the share price, given current economic trends. Once things begin to stabilise, however, I may consider bolstering my current position to lower my average weighted price.
