Boohoo revenue beats estimates after ‘outstanding’ first half

Revenue at teen fashion brand Boohoo topped £1 billion (€1.1 billion) over a 12-month period for the first time following what it described as an "outstanding" first half.

Sales were £565 million in the six months to end-August – up 43 per cent versus the same period last year – and higher than analyst expectations of around £540 million.

Earnings before interest, tax, depreciation and amortisation were £60.7 million, against consensus forecasts of £56 million, and up 53 per cent from a year ago.

However, the company did not make any changes to its own forecasts. It had upgraded its full-year guidance this month by raising its revenue growth forecast to 33-38 per cent from 25-30 per cent.

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"It has been a fantastic first half of the year for the group," said John Lyttle, the Irishman and former Primark executive who now runs Boohoo. "We enter the second half of the year well-placed and confident that our platform . . . will deliver further market share gains."

Growth rates were strongest at Nasty Gal and PrettyLittleThing, which were acquired in 2017, but even the core Boohoo brand's revenue was up 34 per cent. Other performance indicators, such as average basket value, order frequency and number of items in each basket also increased.

Expand

Although international revenues now make up more than two-fifths of the total, the company still ships products from two warehouses in the UK. These have capacity to support around £3 billion of sales but Mr Lyttle said that Boohoo was considering how, where and when to expand its distribution infrastructure.

“The easy bit is deciding the location, the level of automation and whether to operate or outsource to 3PL [third party logistics],” he said. “Deciding how that fits with the business model is much harder,” he added, citing varying tariff levels in other markets and the complications of operating more than one stock pool.

Asos

At peer Asos, whose annual sales have surpassed £2 billion, a move to overseas warehouses proved troublesome, resulting in reduced product availability and longer shipping times.

Boohoo's finance director Neil Catto said that, given the expected levels of investment and rapid growth of the company, it would maintain a strong balance sheet; the company ended the period with net cash of £207 million.

In August, it acquired the online business of Karen Millen in a pre-pack administration for £18.2 million, hoping to use it to attract more attention from younger customers. The Karen Millen website will relaunch on the Boohoo platform in October.

The company is known for its adept use of social media and influencers. During the period, its Miss Pap brand signed a £1 million contract with Amber Gill, this year's winner of reality television show Love Island.

Mr Catto said that the group would continue to spend around 9 per cent of sales on marketing, with almost half the resulting £100 million expenditure going to influencers such as Ms Gill, England footballer Dele Alli, actress Em Rata and US rap star Saweetie.

All-time high

The shares were about 1 per cent lower in early trade but have risen around 40 per cent this year, hitting an all-time high of 283p earlier this month.

Caroline Gulliver, an analyst at house broker Jefferies, said the full-year guidance was likely to prove conservative and "left plenty in the tank" for promotional activity around Christmas and Black Friday.

Barclays said that Boohoo's momentum "is unlikely to be disrupted near-term" but noted that the shares are not cheap, trading at 42 times forecast profits. – Copyright The Financial Times Limited 2019