Online fast fashion retailer Boohoo has reported a double-digit hike in full-year sales and earnings, with group revenue surging 44% to GBP1.2bn. With its key brands likely to benefit from their value propositions once nationwide lockdown restrictions are lifted and consumers are able to start going out again, the retailer is well-positioned to weather the retail storm caused by the Covid-19 pandemic.
Emily Salter, retail analyst at GlobalData:
‘Well-positioned to deal with the impacts of Covid-19, the Boohoo group has reported another set of enviable results, with group revenue rising 44.1%, ahead of the revised group expectations of 40-42% it provided in January, indicating a stellar final quarter. Growth was driven by its key brands, with, unusually, boohoo.com reporting a stronger performance than younger sister brand PrettyLittleThing at 39.1% versus 37.9% respectively, as the brands continue to grow internationally and resonate with their young shoppers with trend-led products and influencer-focused marketing.
“The retailer reported that trading has been mixed since mid-March due to the impacts of the coronavirus outbreak in Europe and the US, with an initial decrease in year-on-year growth followed by an improvement in April, as it attempts to capitalise upon the demand for loungewear and work from home attire from its young, image-conscious shoppers.
“As with rival ASOS, the Boohoo group came under fire in March for keeping its warehouse open during lockdown, but stayed open and provided reassurance that social distancing measures were in place. Additionally, with other players such as Arcadia and New Look being criticised for cancelling stock and delaying payment to their suppliers, the Boohoo group is continuing to pay its suppliers on time and has set up an emergency fund to help them, strengthening its supply chain and boosting consumer perceptions of its ethics which will benefit it in the long term.
“Though the Boohoo group has not provided any guidance for its FY2020/21, it is well-positioned to weather the retail storm as an agile online pureplay, and when consumers are able to start going out again, its key brands will benefit from their value propositions during a period of low consumer confidence.
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“Newer acquisitions Karen Millen and Coast will be the most exposed due to their occasionwear focus and higher price points, and cracks are already showing with the brands offering 40% and 50% off everything. This will have little impact on the fate of the group though, as Karen Millen, Coast, and MissPap combined only account for 1.5% of total revenue.”
Nigel Frith, a senior market analyst at www.asktraders.com:
“Boohoo appears to be unbeatable. The online fast-fashion retailer not only posted impressive final results to year-end 29 February, but more importantly, the group has said that sales in April are ahead of last year. Not bad at all given the current lockdown climate.
“Boohoo is proving to be a beacon of light in otherwise dark times. Whilst Boohoo haven’t provided any financial details on how it is coping with the crisis, investors haven’t deemed it necessary. Advising that they are operating with tightened safety measures at its warehouse and that it has set up an emergency fund to help suppliers. The stock price jumped over 4%.
“Boohoo’s reign looks set to continue even after lockdown eases. Without a vaccine, social distancing measures are likely to remain in place for some time to come, meaning reduced numbers in bricks and mortar shops. This can only be beneficial for Boohoo which continues to grab market share.”
Greg Lawless, analyst at Shore Capital:
“Group revenues rose by 44% year-on-year to GBP1.23bn and EBITDA rose by 50% year-on-year to GBP127m, an EBITDA margin of 10.2% (+30bp year-on-year). We consider these to be strong and commendable performance metrics.
“Boohoo delivered strong revenue growth across all of its brands and each of its geographies in our opinion. UK sales grew by 39% year-on-year and international sales grew by 51%, the latter now accounting for 45% of total revenues (FY20219; 43%).
“In terms of outlook, the Boohoo statement highlights that since the middle of March 2020, trading has been mixed with initially a marked decrease in year-on-year growth. Encouragingly, trading performance has improved in more recent weeks and the firm is now seeing improved activity during April. The outlook statement is not surprising to us in its caution, and the company has withdrawn guidance for FY2021; previous guidance was to deliver FY2021 revenue growth of at least 25% and an adjusted EBITDA margin of around 10%.
“The company has stressed tested its liquidity, analysing a range of scenarios including a downturn in demand and the possibility of warehouse closures. Accordingly, the statement highlights that Boohoo has sufficient financial headroom, benefiting from its largely variable cost base, low cash burn rate and strong balance sheet with GBP241mn of net cash at year-end to press on as a going concern. Such a position stands Boohoo apart, noting recent equity fund raises from Asos and Joules.
“The strong balance sheet should allow the company to weather the current storm but it remains to be seen how its core focus on millennial customers will play out with many economic uncertainties, particularly around employment and consumer confidence, which may sharply impact on customer spending patterns.”
Aneesha Sherman, Bernstein Research:
Sherman notes a “strong” peformance in the second half. “Revenue growth was a beat on consensus and Bernstein estimates, growing at 44.9% for H2 (+170bps vs. BERNe). Underlying revenue metrics were very strong, with improving frequency, units per basket and average order size, and a steady conversion rate.
“Gross margin was slightly down year-on-year across the core brands but up significantly for the newly acquired brands, therefore overall in line with consensus and Bernstein estimates (53.7% for H2 vs. 53.6% cons, 53.8% BERNe).”
She adds sales are recovering after March hit, noting; “The Covid impact came through in the middle of March, with an initial marked decrease in sales, in line with the online apparel sector. As we have seen across the online sector, the group has experienced an improvement in the trend in April – a good sign for FY 2020.
“No guidance for FY21, for obvious reasons, but the company has assessed stress tests that include demand downturns as well as warehouse closures. The distribution network is currently operational with social distancing put in place.
“We view these as very positive results not only for 2019 but for the 2020 outlook as well.”
