Pure-play online fashion retailer Boohoo.com struts onto Aim a week today with a bumper £560 million price tag. Successfully tapping appetite for web-based growth tales, the company has raked in £300 million at 50p per share ahead of one of retail's more eagerly-anticipated IPOs.
Boohoo's debut market cap may raise eyebrows, valuing the business at more than six times the £92 million sales generated for the 10 months to December and 55 times plus its £10.1 million of EBITDA. Yet the retailer is undoubtedly delivering eye-catching sales growth and boasts structural advantages.
Manchester-based Boohoo is the UK's biggest pure-play online exclusively own-brand fashion retailer, selling value-for-money yet 'on-trend' fashion lines often inspired by celebrity trends. Selling into over 100 countries, its designs are targeted towards a core market of 16-24 year olds, mainly women, who've been brought up buying a large proportion of clothing over the internet. This youthful demographic are regular social media users, further playing to the strengths of Boohoo, a business that makes extensive advertising use of Facebook, Twitter and Instagram.
Founded in 2006 by joint CEOs Mahmud Kamani and Carol Kane and with former ASOS (ASC:AIM) director Peter Williams in the chair, the apparel retailer has over 2.3 million active customers and is on a growth tear. Around 140,000 new customers are registering on boohoo.com per month, no doubt helped by a fast turnaround of fashion trends 'from catwalk to closet' and a flurry of new products added to the website each week.
High gross margins of 60% plus, reflecting its exclusive focus on higher-margin own brands, are likely to attract followers and the model is proven and profitable. Over the aforementioned 10 month period, sales strutted 70% higher to £92 million, driving adjusted EBITDA 188% north to £10.1 million.
Amid strong demand from institutional investors. Zeus Capital has helped Boohoo to a £300 million haul, £50 million of which will be used to accelerate expansion and top up working capital coffers. IPO proceeds will also be deployed in expanding boohoo's Burnley warehouse and invested in IT and infrastructure to support overseas growth. Some £240 million goes to repaying convertible loan notes held by existing shareholders – the Kamani family will hold sway with a 44% stake post float.
Joining the retail sector's select band of structural winners, Boohoo has clear growth prospects both at home and abroad. Online retail sales are forecast to take 23.5% of total UK fashion retail sales by 2016 and the global apparel retail market is expected to grow to £987 billion by 2017.
We believe debut dealings will go well as investors compete for stock so as to not miss out on the next potential ASOS.
For all the latest IPO news, read our free IPO guide which is updated daily on the Shares website.