A recap of P1: boohoo reported solid numbers for P1 (3 months to 31st May), with the boohoo brand showing an acceleration in growth and PLT reporting solid growth, despite very tough comparatives (see Solid P1,12 June) Management later commented during the analyst call that P1 had been “very profitable” and boohoo had enjoyed its largest week ever, outside of Black Friday, when other peers were reporting softer trading. Further, trading in Q2 had so far been “very strong” despite good weather last year. Margin cushion building for Black Friday: Management said it believed the 70bps decline in margin it had expected this year (from higher distribution costs) had not materialised to date. The company also stated that it expected further margin benefits from automation of its warehouse operations in Burnley and further scale benefits at Sheffield. We estimate that 70bps of margin alone is equivalent to £8m of incremental profit. Rather than allowing such profit to fall to the bottom line, we believe management will deploy investment back into promotion – either through increased marketing or gross margin investment around Black Friday this year, underpinning top-line forecasts. De-rating: Since P1, the shares have de-rated amidst industry-wide concerns around clothing sales stagnating in late May and early June. Given the positive momentum boohoo reported just three weeks ago, we believe life has changed little since then. We also note that Primark reported (on Thursday) very good exit rates in June across both the UK and Europe. Not all is bad in the industry. Our view: We have long argued that margins are underpinned at boohoo and fears of PLT cannibalsaition are overdone (see Further to go and Underpinning a 10% EBITDA margin). Elsewhere, the momentum at Nasty Gal is eyecatching. The recent sell-off is overdone, in our view, and we suspect upgrades will come later in the year. BUY.