Boohoo bucks brutal clothing retail market

Online-only business now worth 20 times more than Debenhams

Boohoo sells own-brand clothing, shoes, accessories and beauty products. Its brands include PrettyLittleThing and Nasty Gal. Photograph: Reuters

Boohoo sells own-brand clothing, shoes, accessories and beauty products. Its brands include PrettyLittleThing and Nasty Gal. Photograph: Reuters

 

Fashion retailer Boohoo, a brand beloved of Irish teens, raised its sales guidance on Wednesday as it beat forecasts with a 22 per cent first-half profit rise, underlining shoppers’ rapid shift to online retail.

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 such as Marks & Spencer and Debenhams have seen profits slump and are closing stores, but pure internet players such as 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 in early trade.

The rise gives Boohoo a market capitalisation of £2.39 billion (€2.7 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 31st, up from £20.3 million in the same period last year, on revenue up 50 percent to £395.3 million.

Asos, which is 18 years old and unlike Boohoo sells third-party brands as well, is due to update on trading on October 17th. 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 chief executives Mahmud Kamani and Carol Kane.

Together the Kamani family and Ms 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 £3 billion of net sales globally.

For the full year to February 28th, 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 £58 million.

The package includes the possibility of a £50 million share plan payout if Boohoo’s market value hits £5.6 billion 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 clothing retailer Next forecast flat profit for the full 2018-2019 year after two straight years of decline. Its online business is growing strongly while sales at its stores continue to decline. – Reuters