UK’s Fashion Retailer Boohoo Raises Its Sales Guidance Amid Robust Business

UK’s online fashion retailer Boohoo raised its sales guidance on Wednesday (26) as it beat forecasts with a 22 per cent first-half profit rise, underlining Britain's rapid shift to online shopping.

Founded just 12 years ago in Manchester, northern England, Boohoo has expanded quickly, listing its shares in 2014 and buying the PrettyLittleThing and Nasty Gal brands last year.

British clothing retailers like Marks & Spencer and Debenhams have seen profits slump and are closing stores, but pure internet players like ASOS and Boohoo are tapping-in to a generation of consumers who shop on their mobile phones and share fashion tips via social media.

Shares in Boohoo, which sells own-brand clothing, shoes, accessories and beauty products, largely to 16 to 30-year-olds, were up by 9 per cent to 209 pence at 08.13 GMT.

The rise gives Boohoo a market capitalisation of £2.39 billion, which is some 20 times the equity value of the 240-year-old Debenhams.

Boohoo said its pretax profit was £24.7 million in the six months to August 31, up from £20.3m pounds in the same period last year, on revenue up 50 per cent to £395.3m.

ASOS, which is 18 years old and unlike Boohoo sells third party brands as well, is due to update on trading on October 17. Its shares were up 2.2 per cent.

"All of our brands performed extremely well across all territories as we continue to gain market share," said Boohoo's joint CEOs Mahmud Kamani and Carol Kane.

Together the Kamani family and Kane own 36 per cent of Boohoo's equity.

Standout Performer

PrettyLittleThing was the standout performer in the business, with its revenue soaring 132 per cent despite the relocation of its distribution centre to Sheffield, northern England, during the period.

The core Boohoo brand's distribution centre in Burnley is also being extended, giving the group a network capable of generating £3bn of net sales globally.

For the full-year to February 28, 2019, Boohoo forecast revenue growth of 38 per cent to 43 per cent, up from previous guidance of 35 per cent to 40 per cent, with adjusted EBITDA margin of between 9 per cent and 10 per cent.

Medium-term guidance of sales growth of at least 25 per cent per annum and EBITDA margin of 10 per cent was also reiterated by the firm.

Last week Boohoo appointed John Lyttle, the current chief operating officer at Primark, as its new chief executive, with effect from March next year, on a pay package that could earn him almost £58m.

The package includes the possibility of a £50m share plan payout if Boohoo's market value hits £5.6bn in five years.

"With 11.7 million active customers across the brands, expanded distribution capacity, successful marketing campaigns, 41 per cent of the business now outside the UK, and a rising cash balance on the balance sheet, boohoo seems very well positioned to continue its impressive growth trajectory," said analysts at Jefferies, who have a "buy" stance on the stock.

On Tuesday (25) clothing retailer Next forecast flat profit for the full 2018-19 year after two straight years of decline. Its online business is growing strongly while sales at its stores continue to decline.

Next pointed to the problems this creates - as retail sales decline many fixed costs remain but as online sales grow its variable costs increase ($1 = £0.7599 ).

(Reuters)