boohoo shares: a rare chance to get rich?

boohoo (LSE:BOO) share price in Euros over the past few years. However, the online fast fashion retailer is off to a strong start in 2023 after sinking for five years in December. The share price is up 42% this year, reaching 52p today.

As a sentiment against AIM-listed companies fix, can investing in boohoo stock make me rich?

Here I am.

Back in fashion?

boohoo’s business model almost exclusively limited to the online world until the last weekend. In the UK for the first time, the company launched a pop-up store in London to showcase its spring collection.

The retailer previously experimented with a New York pop-up in 2014. Additionally, by Karen Millen which is part of the boohoo group, briefly resume physical trading in the weekend store until the end of the month. And in 2021, it has opened a Debenhams beauty shop in Manchester.

A foray into a brick-and-mortar store can be a sneaky move. Various consumer surveys show enthusiasm among the British public to return to shopping in stores after the online boom during the pandemic.

But Jefferies analysts also highlighted boohoo”marked outperformance” finished FTSE 250 competition ASOS on web traffic and app downloads in 2023.

Some kind of physical footprint coupled with new strengths in its core online offering could be an interesting combination to boost boohoo’s share price.

Reasons to be cautious

However, a toe-in-the-water approach hardly represents a major commitment to physical retail. And there are many challenges that could undermine the company’s progress this year.

Chinese competitor Shein has taken the world’s fast fashion market by storm. Shein is also increasing its private retail presence in the UK with pop-up stores next month in Bristol and Cardiff. It follows the company’s Birmingham experience which coincides with boohoo’s launch in London. The battle for Gen Z consumers is heating up and boohoo needs to be nimble to stay in the race.

Beyond the competitive landscape, my main concern is boohoo’s latest financial results. In my view, they don’t seem to justify the rapid growth of share prices.

Total revenue for the four months to 31 December 2022 was down 11% year-on-year to £637.7m. Additionally, the company expects its EBITDA margin for FY23 to be 3.5%. The closest of the previous forecasts is between 3% and 5%.

In addition, boohoo is facing backlash over its remuneration plan. The business plans to reward its bosses with a £175m bonus payment if its share price recovers in line with a range of targets. Although chairman Iain McDonald is confident this will “rein harmony“In the interest of management and investors, many independent shareholders voted against the proposal.

Should I buy boohoo shares?

There are positive signs for boohoo after a miserable 2022. In particular, I like the company’s – albeit limited – ambition to tap the potential of brick-and-mortar stores.

That said online retail remains a key focus, and I haven’t seen enough concrete evidence that the business is on a sustainable path to recovery. Intensifying competition is a big concern.

As things stand, I don’t think boohoo shares are a golden ticket to get rich. I’m waiting for the full year results release in May, but, as it happens, I’ll be looking for stocks elsewhere with a better risk/reward profile.