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Are Boohoo shares worth buying today?

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I’ve been bearish on Boohoo (LSE: BOO) shares for sometime. And the stock hasn’t delivered great returns in 2021 so far. It’s down almost 5% since the beginning of the year. The shares have fallen over 20% in the last 12 months.

So is this a buying opportunity? I’m not convinced it is and so I’ll only be watching the stock closely for the time being. But Boohoo released a trading update earlier this week, at which I think it’s worth taking a closer look.

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Trading update

In the three months to the end of May, the company delivered a 32% increase in total sales to £486.1m. A lot of this performance was generated from the US and UK.

During the period, Boohoo managed to integrate and relaunch the brands it purchased in the pandemic. These include, Dorothy Perkins, Wallis and Burton. It also relaunched Debenhams for fashion, beauty and homewares. And it has “an exciting pipeline of brands” for its digital department store.

This all sounds great. The easing of lockdown restrictions especially in the UK has continued to boost sales. Clearly customers are still buying clothes to go out and embrace their new-found social lives after lockdown.

Boohoo now has a larger portfolio of brands as it snapped up some of the pandemic’s high-street victims. This has served the online retailer well as it gives its customers more choice.

The outlook

The company has maintained its forward guidance. It expects the year ending 28 February 2022 to see “revenue growth of around 25% and adjusted EBITDA margins to be in the region of 9.5-10%”.

Its medium-term guidance also remains unchanged. Boohoo believes it can deliver “25% sales growth per annum and a 10% adjusted EBITDA margin”.

To me, the fact that it expects to generates these kind of figures is good. But I think Boohoo is setting the bar high for sales growth and is making life difficult for itself. In my opinion, if investors believe that it can always smash expectations, that sets it up to disappoint.

I’m not dismissing the company’s growth. It’s strong, but clearly not enough for Boohoo to raise earnings guidance. The market has probably seen this as a disappointment and that’s why the shares haven’t rallied after the announcement.

My concerns

I still don’t think the company has repaired its reputation after the Leicester supply chain scandal. Boohoo did publish its UK supplier list in March and it remains on track to announce the names of its global suppliers in September.

But I don’t think this is enough yet. And judging by the poor share price performance, I don’t think the market is convinced either. I can’t help but worry if the firm has more skeletons in its closet.

Rectifying its reputation is a work in progress and may continue to place pressure on Boohoo shares. The company is starting to be more transparent, but this will take time. For now, I’m not ready to dip my toe in and so, as I said, I’ll only be watching the stock.

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Nadia Yaqub has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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