Online fashion phenomenon Boohoo (BOO:AIM) put smiles on investors’ faces yet again on Tuesday, the shares adding 3.8% to trade at a new all-time high of 330p on news of another cracking quarter and a further earnings upgrade.
Sales growth beat expectations over a record four months to December, as Boohoo bucked the wider sector doom and gloom over Christmas and delivered a record Black Friday weekend.
ANOTHER FESTIVE CRACKER
Revenue rocketed 44% higher to £473.7m for the four months to 31 December with growth achieved across all brands and geographic regions including the USA, Rest of Europe, Rest of World and even the ultra-competitive UK clothing market.
The two biggest brands, boohoo and PrettyLittleThing, delivered rapid growth of 42% to £232.6m and 32% to £190.8m respectively. However Boohoo’s fastest-growing brand was Nasty Gal, with revenue growth of 102% to £41.5m for the period.
Clearly, Boohoo’s marketing campaigns continue to resonate with its target price-conscious youthful demographic as it cannily uses social media to drive awareness of a portfolio of brands that are all developing at pace.
Buoyed by better than expected festive sales, Boohoo is guiding towards group revenue growth of 40%-to-42% for the year to 29 February 2020, ahead of previous guidance of 33%-to-38% growth.
One of 2019’s best performing shares, Boohoo now expects to deliver an adjusted EBITDA margin of 10% to 10.2% this year, up from earlier guidance of ‘around 10%’.
Sitting on a bumper £245m net cash pile, Boohoo is sticking with its medium term guidance of 25% per annum sales growth, a growth rate most retailers would kill for.
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Liberum Capital says the aforementioned net cash position is ‘allowing significant reinvestment back into the business to continue strengthening the entire customer proposition (including pricing, product, marketing, delivery) and the group’s systems and infrastructure.
‘Not only this, but it gives room for ongoing M&A and subsequent investment into new brands that can be plugged into, and leverage, the group’s core infrastructure. These bring new customers, extend the demographic and broaden the long-term, addressable market opportunity.’
Boohoo’s chief executive John Lyttle insisted: ‘The newly-acquired brands, MissPap, Karen Millen and Coast, are showing great promise and open different target markets for the group, in line with our strategy to build our multi-brand platform.’
THE EXPERTS’ VIEW
Liberum upgraded its 2020 pre-tax profit estimate by 11.6% to £106m and its 2021 pre-tax profit forecast by 15.3% to £129.6m following today’s update, thundering that ‘boohoo’s business model and operational execution is delivering best-in-class growth and earnings momentum - we had already upgraded EBITDA by 22% over the last year prior to today.’
Reiterating its ‘buy’ rating, Shore Capital said the Boohoo investment case is ‘centred on leveraging the operating platform across the six brands’ and continues to highlight ‘the potential for boohoo group to become the online version of Inditex, with its own stable of eight high street brands (Zara, Pull and Bear…).’