Shares in Boohoo (BOO:AIM) softened 1.2% to 323p despite the online fast-fashion retailer strutting in with another set of record annual results, revealing sales up 41% to almost £1.75 billion as lockdowns kept competitors’ brick and mortar outlets closed and triggered a digital shopping boom.

Adjusted pre-tax profits surged 38% higher to £150 million in the year to February 2021 and Boohoo insisted it is seeing ‘early rewards’ from the acquisitions of Debenhams’ online business and three brands from the collapsed Arcadia Group, namely Dorothy Perkins, Wallis and Burton.

GROWTH SLOWDOWN AHEAD

Yet the shares were marked down as the lockdown beneficiary guided for a slowdown in sales growth to 25% this year, slightly below the 29% called for by consensus.

Boohoo said trading in the first few weeks of the year to February 2022 has been ‘encouraging’.

Yet the company cautioned the economic outlook ‘remains uncertain’ and warned the benefits seen from reduced clothing returns over the last twelve months will begin to unwind as lockdown eases.

Also weighing on sentiment were comments from the company that it is ‘still experiencing significantly elevated levels of carriage and freight costs’ and that investment in newly-acquired brands Oasis, Warehouse, Debenhams, Dorothy Perkins, Burton and Wallis will dilute the group’s overall adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation) margin this year.

RE-ENERGISED AND MADE RELEVANT

‘Our newly-acquired brands are being re-energised and made relevant for today’s consumer across a broader market demographic,’ insisted CEO John Lyttle.

‘We are very excited about their potential and are already seeing the early rewards from their growth.’

Lyttle also explained that Boohoo has invested in improving the oversight and transparency of its supply chain and ‘we are committed to embedding positive change through our ambitious UP.FRONT sustainability strategy’.

THE EXPERTS’ VIEW

‘Lockdown has boosted Boohoo’s sales by 44%; disruption to air freight has impacted global growth and governance with a capital G is front and centre as the group looks to put supply chain issues firmly in its rear-view mirror,’ commented AJ Bell financial analyst Danni Hewson.

She added that ‘existing customers might not have been put off by the businesses supply chain failings, but Boohoo is diversifying.

‘Its integration of brands like Debenhams will require it to attract a new shopper. Price is undeniably important but as retail reopens and competition intensifies the story behind the brand will become ever more important. Splashing out should make customers feel good about their purchases; giving them one more reason to feel the glow has to be excellent for business.’

Despite today’s record results, Liberum Capital has a ‘hold’ rating on Boohoo. ‘While the continued strong financial performance suggests a “buy” rating,’ said the broker, ‘we remain cautious given the scale of the ESG challenges facing the group, the possibility of follow-up investigations and potential financial impact from an ethical supply chain though the company guidance dismisses this.’

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Issue Date: 05 May 2021