Interactive Investor

AIM heavyweight Boohoo still growing fast in Q1

15th June 2021 09:11

Richard Hunter from interactive investor

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It must overcome problems off the pitch, but Boohoo has put in another strong performance here.

Boohoo Group (LSE:BOO) is spinning the plates successfully at the moment, with its twin focus of acquisitive growth and an ethical reset showing continued signs of progress.

The reputational issues which previously blighted the company are in the process of a forensic review, and the accompanying release provides an update on the group’s “Agenda for Change”, which seeks to introduce an ethical, transparent and sustainable business practice in the supply chain. The global supplier list will be published in September, and the scale of the progress made so far should alleviate many of the previous issues.

In the meantime, and despite strong comparatives against sales being driven online last year at the height of the pandemic, business growth continues apace. At this stage, there seems to have been little effect following the easing of lockdowns, with consumers having the additional choice of physical shopping to unleash some of the pent-up demand in the retail space.

The integration of the Dorothy Perkins, Wallis and Burton brands online has been an early winner, with elevated hopes also following the launch of the Debenhams digital department store, whose lines include fashion, beauty and homewares.

Indeed, overall revenues grew by 32% in the first quarter, with important and impressive contributions from its two largest markets in the UK and the US. For the UK, which accounts for 57% of revenues, growth accelerated by 50% and in the US (27% of revenues), sales were ahead by 43%. This underlines the stellar progress the company has made, with overall revenue growth over two years at 91%, driven on by the UK rising 95% and the US 157%.

Meanwhile, net cash remains at a healthy £199 million, bolstered by a previous fundraising exercise but recently reduced by investment across offices and infrastructure. The blot on this particular update is a 0.6% reduction in gross margin, although at 55% and against strong comparatives this is of little immediate concern.

More broadly, the lack of a dividend will not attract the income seeking investor, although the company’s strategy to reinvest in the business instead is clearly reaping rewards. 

Some of the shine has been taken off this revenue progress by the widely reported issues which the company has faced. At the same time, rectifying the reputational damage remains a work in progress and the share price has declined by 10% over the last year, during which time the wider FTSE AIM 100 index has surged ahead by 38%.

Over the last two years, however the shares remain up by 49% despite the dip and investor sentiment remains defiantly optimistic on prospects, with the market consensus still coming in at a 'strong buy'.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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