Investors are smiling again on pure-play online fashion retailer Boohoo.com (BOO:AIM), the shares up 5.5% to 26.63p on relief there are no further downgrades to full-year guidance following a profit warning earlier this year. A positive new year outlook and share buyback news are also helping the fallen own-brand fashion retailer strut back into fashion.
Boohoo's management certainly needs to rebuild confidence following a shock profit warning (7 Jan), reflecting a tough third quarter in a promotional UK market and which swiped 40% from the share price.
Today's update for the two months to 28 February, which you can pick through in detail here, represents a solid start. Sales grew 22% to almost £21.9 million in the final two months of the financial year, slightly shy of expectations on lower marketing spend that will be stepped up ahead of the Spring/Summer season.
In other good news, Manchester-based Boohoo, a running Shares Play of the Week, assures the full-year earnings before interest, taxation, depreciation and amortisation (EBITDA) margin will be around 10% as forecast. Furthermore, there's a positive commentary from the fashion e-tailer, flagging market share gains in the UK, strong growth in the Rest of Europe and Rest of World regions and progress in extending its product range.
Flush with £54 million of year-end net cash, Boohoo is also seeking to buy back up to 10% of its shares, taking the opportunity to return surplus cash while its equity languishes at depressed levels. This demonstrates management's confidence in the strength of the business model and the sustainability of the long-term international growth story.
N+1 Singer raises its target price by 4p to 35p in light of the more benign outlook. 'With a renewed focus on product and execution, and marketing to return to normal, momentum should be re-established in FY16,' says the broker. 'Forward growth of 25% looks well underpinned. This should help confidence gradually return and there is substantial scope for re-rating.'