Boohoo (BOOH), an online retailer which sells its own-branded clothes alongside its low-cost ranges PrettyLittleThing and Nasty Gal, delivered soaring revenues and a bumper profit last year. As celebrity influencers and social media marketing continued to drive consumers to its fast fashion, reported revenue was up by 48 per cent to £856.9 million in FY19, beating analysts’ estimate of a 45.5 per cent surge. The retailer, which is known for its successful social media presence and £20 party outfits, has outperformed its rivals on the crisis-stricken UK high street to deliver strong share price and revenue growth in recent months. John Lyttle was last month named as the new chief executive, and the results are the first under him.
Research analysts have described the company as a “bright light” in a “struggling retail sector”. The company added new ranges of clothes and successfully signed up more celebrities to its social-media based advertising campaigns. This helped the company to increase sales at Nasty Gal by 96 per cent to £47.9 million, while revenue at PrettyLittleThing more than doubled to £374.4 million. Due to successful media campaigns and a choice of great fashion at unbeatable prices, the market share of the company is also increasing. Gross margin also increased to 54.7 per cent over the year from 52.8 per cent reported in 2017, driven by “refinement of the customer proposition” and tighter control over stock. However, amid a proliferation of competition in fast fashion, analysts have questioned the sustainability of growth in gross margin.
Revenue growth was reported across all brands in all regions with international sales up by 64 per cent and UK sales up by 37 per cent. Adjusted EBITDA rose to £84.5 million in 2018, with EBITDA margin reported a slight improvement to 9.9 per cent. While adjusted profit before tax rose to £76.3 million from £51.0 million reported in 2017. Growth of 38 per cent in pre-tax profits to £59.9 million was behind the analysts’ consensus for a rise of 55 per cent to £67 million. With a robust operating cash flow of £111.9 million was reported, with a strong balance sheet with net cash of £190.7 million.
The company boosted its social media presence by launching collaborations with celebrities and influencers including Paris Hilton, UK rapper Stefflon Don and US model Ashley Graham, and the number of active customers rose by 9 per cent over the last year to 7 million. However, growth in active customers was less than the previous year.
The company’s rival Asos had a tough few months. After the company reported that its half-year earnings had plummeted 90 per cent and had warned on performance, its shares sank 40 per cent in a single day.
Share Price Commentary
Daily Chart as at April-26-19, before the market closed (Source: Thomson Reuters)
On 26th April 2019, at the time of writing (before the market closed, GMT 09:20 am), BOOH shares were trading at GBX 240.90, up by 0.37 per cent against its previous day closing price. Stock’s 52 weeks High and Low is GBX 247.80/GBX 146.39. At the time of writing, the share was trading 2.78 per cent lower than its 52w High and 64.56 per cent higher than its 52w low. The company’s stock beta was 1.45, reflecting more volatility as compared to the benchmark index. Total outstanding market capitalisation was around £2.79 billion.