Online fast fashion retailer Boohoo (BOO:AIM) reported strong trading for the quarter to 31 May 2021, with group sales strutting 32% higher year-on-year to £486.1 million, ahead of the 28% growth called for by consensus.

Yet despite news of a ‘strong start’ to the new financial year delivered in the face of tough comparatives, management remains cautious in terms of the outlook and left guidance unchanged.

This disappointed investors accustomed to upgrades and capped any share price gains, with Boohoo bid up just 0.3% to 329.4p early on.

EYE-CATCHING UK & US GROWTH

During the first quarter, sales grew strongly in the UK and US as ‘back to normal’ categories such as tops and dresses performed well on re-opening optimism, although sales fell in the Rest of Europe due to lockdown restrictions and Brexit-related complexities, and also reversed in Boohoo’s Rest of World markets.

The period also saw the PrettyLittleThing-to-Nasty Gal owner integrated and relaunch the Dorothy Perkins, Wallis and Burton brands acquired out of the ashes of Arcadia, and Boohoo has also relaunched Debenhams as a digital department store for fashion, beauty and homeware.

Chief executive John Lyttle was ‘delighted’ with Boohoo’s performance in the 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.

‘The two year compound annual growth rate of 38% highlights the group’s continued phenomenal growth, with revenues having increased 91% over the last two years, with particularly strong performance in key markets such as the UK and US, where sales have more than doubled.’

Gross margin declined by 60 basis points to 55%, a better than anticipated result against a strong comparative and reflecting Boohoo’s continued investment in developing the newer brands in the portfolio.

NO ADDITIONAL UPGRADES

Boohoo is sticking with its guidance for the year to February 2022 amid pandemic induced uncertainty in a number of its markets around the world.

The retailer expects to deliver revenue growth of ‘around 25%’ and adjusted EBITDA margins ‘in the region of 9.5%-to-10%’ this year, while medium-term guidance for 25% sales growth a year and a 10% adjusted EBITDA margin also remains unchanged.

Boohoo also provided a positive update on the Agenda for Change programme, which highlighted the progress it continues to make in the auditing of its UK supply chain following last year’s damaging modern slavery scandal.

THE EXPERT’S VIEW

AJ Bell investment director Russ Mould commented: ‘There are quite a lot of moving parts with Boohoo beyond the headline sales figures. It is having to juggle the integration of acquired Debenhams assets alongside an ongoing plan to improve governance practices and improve monitoring of its supply chain, as well as investing in its business to improve infrastructure.

‘The best Boohoo can do is stay focused and try to execute on its plans as best as possible. The slow easing of lockdown restrictions in its various sales territories should provide a new catalyst for sales as individuals buy clothes for their new-found social life.

‘If it can sustain decent levels of growth in the UK and US and repair its damaged reputation following the supply chain scandal, Boohoo could be coming out smiling. It just isn’t quite there yet.’

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Issue Date: 15 Jun 2021