Interactive Investor

ii view: Boohoo's Q1 results demonstrate progress

17th June 2021 16:03

Keith Bowman from interactive investor

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Reputational issues are being tackled, with sales growing both here and overseas. Buy, sell or hold? 

First-quarter trading update to 31 May

  • Revenue up 32% to £486 million
  • Net cash of £199.1 million, down from £276 million on 28 February

Guidance:

  • Expects current full year revenue growth of around 25%

Chief executive John Lyttle said:

"I am delighted with our performance in the first quarter, particularly as it was always going to be challenging to produce strong growth rates on last year, when lockdowns around the globe drove such high traffic to online retailers.”

ii round-up

Founded in Manchester in 2006, Boohoo (LSE:BOO) is today a major online clothing and fashion accessory retailer. 

Via purchases and acquisitions, its other brands also now include PrettyLittleThing, Nasty Gal, MissPap, Karen Millen, Coast, Debenhams, Dorothy Perkins, Wallis and Burton.

For a round-up of this latest trading update, please click here.

ii view:

In 2011, Boohoo aired its first TV ads, launching its business overseas in the US and Australia the following year. In 2014, it came to the UK stock market, and today it has around 18 million active customers across all its brands globally.

For investors, reputational concerns and possible increased costs required to address issues need to be considered. Environmental and sustainability issues regarding the fast fashion industry more broadly also warrant consideration. What is a responsible number of times for consumers to wear a garment, and how should it be disposed of? Boohoo, unlike retailing rivals Next (LSE:NXT) and Primark owner AB Foods (LSE:ABF), has not yet paid any dividends. 

But some progress in addressing its own in-house issues has been seen, while the impact on sales appears to have been minimal. Online shopping habits strengthened during the pandemic and may continue to grow. The estimated forward price/earnings (PE) ratio also now sits below the three-year average, suggesting the shares are not expensive. In all, while some caution remains sensible, Boohoo demonstrates potential for long-term growth.  

Positives: 

  • Geographical diversity
  • Growing portfolio of brands

Negatives:

  • No dividend payments
  • Exposure to currency movements

The average rating of stock market analysts:

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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