Boohoo goes from strength to strength as share price continues to increase
Companies: boohoo group Plc
Online clothing retailer boohoo announced stellar interims this morning, reporting revenue of £127m (+40% year-on-year), gross profit of £70m (+29% YoY), adjusted EBITDA of £16.5 million up from £7.6m in 2015, and PBT of £14.4m a 129% increase.
The group saw revenue growth across all regions, with the UK, its largest market, growing by 38%, Europe growing by 41%, and the USA growing by 93%. The company said marketing expenditure had decreased to 6.3% of revenue (from 12.6% 2015), as growth was stimulated through "greater use of price and delivery promotions" instead.
The Manchester-based retailer saw little impact from currency exchange movements after the EU referendum due to foreign exchange hedges it had placed several months earlier. Today's results did show, however, that weaker sterling had benefitted the company in overseas markets, especially the US:
"...weaker sterling does provide the opportunity to use promotional activity to generate incremental international sales over and above hedged transactions. With an element of many product prices being dollar-based, it remains to be seen what the longer term effect of continued sterling weakness might be in the supply chain."
City broker N+1 Singer said the delivery of another solid set of figures confirmed Boohoo’s progress over the last 18 months, and said it was "no fluke but driven by appealing fundamentals of the brand, online customer engagement, and reinvestment in key capabilities."
Singers analyst Matthew McEachran optimising the mix of promotions and marketing had also contributed to the excellent results as his firm upgraded its forecasts:
"Alongside a broader range (now incl Kidswear) and better quality/ consistency of supply, Boohoo is well placed to accelerate recruitment (marketing) in target markets, which we assume in upgraded forecasts (£25m PBT, +4%). Boohoo’s rapid response, test & repeat, model is very compelling and forecast risk remains to the upside in our view, not just short term but long term via planned (accelerated) investment in warehousing and PLT acquisition accretion."
Zeus Capital also raised its forecasts this morning, saying trading continued to go from strength to strength:
"...boohoo again reports impressive growth of 40% over the H117 period, ahead of our expectations of 33%. In addition to top line growth, there has been improvement in all KPIs, driven primarily by an optimised mix of marketing, price and promotional activity. This has delivered operational leverage and resulted in EPS growth of 124%. The boohoo brand has strong momentum both in the UK and internationally, and coupled with continued investment in operational improvements and technology as well as international expansion, we believe will continue to deliver significant profitable growth."
Zeus analyst John Wilson said the boohoo brand had strong momentum in the UK and overseas which, coupled with continued investment in operational improvements and technology, would help the business deliver "significant profitable growth."
Boohoo's joint CEOs Mahmud Kamani and Carol Kane, said the firm's "inclusive brand, unbeatable choice .... incredible prices and fantastic service" had continued to inspire and appeal to young customers around the world:
"Through our constant focus on what matters to our customers, together with our investment in technology and operational improvements, we will continue to deliver profitable growth.
As a result of our continued momentum in the UK and encouraging growth in selected overseas markets, we now expect revenue growth for the full year of between 30% and 35%, reflecting tougher second half comparatives. Following the success in the first half of the year we will continue to look for opportunities to invest in marketing campaigns and our customer proposition to drive future sales growth and improve customer lifetime value. We will also be making significant investments in our IT systems and Ecommerce platforms. Consequently EBITDA margin for the full year is expected to be around 11%."