Boohoo shines as rivals crash and burn

by Graeme Evans from interactive investor |

Growing sales by 39%, this online fashion retailer is the envy of its high street rivals.

The lofty valuation of Boohoo (LSE:BOO) continues to sit comfortably with the fast fashion business amid more progress in its mission to "disrupt and capture market share" in the UK.

A day after a profits warning by Ted Baker (LSE:TED), the owner of the brands PrettyLittleThing, Boohoo.com and NastyGal painted a more upbeat retail picture as sales jumped 39% to £254.3 million in the first quarter of its financial year.

The performance was broadly in line with expectations, reassuring investors and the City that Boohoo's brands are continuing to hit home with younger shoppers. However, after a share price recovery through the morning session, they've dipped in and out of positive territory on what is a poor day for many stocks.

Now worth £2.7 billion and demanding a price/earnings (PE) multiple of 70x, Boohoo shares have failed to kick on after peaking at 266p in the summer of 2017. Margin worries and fears of increased competition have been blamed for this more subdued performance, even though strong annual results in April went some way to addressing these fears.

Broker Peel Hunt is backing the retailer and its new CEO to achieve further progress after restating its price target of 325p today.

Source: TradingView Past performance is not a guide to future performance

John Lyttle is now at the helm, with the former Primark boss pushing for Boohoo to grow annual sales by 25% and achieve an operating margin of 10% over the medium term.

He said in today's trading update that the group's brands were well‐positioned to "disrupt, gain market share and capitalise on the global opportunity in front of us."

This is backed up by the group recently topping the UK Hitwise rankings for the first time, a landmark that Lyttle said showed Boohoo was capturing the attention of customers. High profile celebrity associations have helped to drive traffic to its websites, alongside the benefits of expansion in the United States.

Today's update showed strong revenues growth across all regions, with the UK up 27% and international trade ahead 56%. There was an encouraging return to form for the Boohoo brand, which lifted revenues by 27% to £123.5 million and boosted its gross margin to 54.1%.

PrettyLittleThing, the trend-setting brand which is 66% owned by Boohoo, continues to post the fastest growth. Its revenues were up 42% to £112.1 million for the three months to May 31, despite strong comparatives with a year earlier. The brand has also benefited from the recent relocation of its distribution centre to a larger facility in Sheffield.

Automation of the group's Burnley distribution centre has just been completed, with the improvements expected to result in greater picking efficiency and reduced costs.

PrettyLittleThing recorded five million active customers at the end of the last financial year, compared with seven million for Boohoo and nearly one million for NastyGal. In March, the group also acquired the Miss Pap brand.

Net cash grew by £57.7 million to £190.7 million in the 2018/19 financial year, but the company's investment requirements mean it is not paying a dividend. 

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.

get more news and expert articles direct to your inbox
Sign up for a free research account and get the latest news and discussion, and create your own Virtual Portfolio