Boohoo turnover doubles, plans to be £3bn group, Nasty Gal sales rising
The good news just keeps coming from Boohoo.com with the online fashion retailer late on Wednesday saying sales more-than-doubled in the past three months. It also announced an upgraded outlook for future sales, that it’s planning for the time when it could be a company with a turnover heading towards £3bn and that it is raising £50m in new working capital to help it with these plans.
So, where to start? How about that sales surge? In the quarter to May 31, it saw revenue of £120.1m, up 106% from £58.2m a year ago. Comparable revenue rose 78%, although the gross margin dipped to 54.2% from 56% on the back of “planned investments in the customer proposition”.
Revenue at the core Boohoo operation itself rose 48% to £86.4m (or 44% if currency exchange effects are stripped out). And the company seems to be roaring ahead globally. The 48% increase divided into a 41% rise in the UK, 44% in the rest of Europe, 97% in the US and 50% everywhere else.
With 5.2m active customers (up 24% year-on-year), the firm is clearly prospering. But while the Boohoo sites represent its biggest operation, the effects of its acquisition strategy are starting to be seen too with PrettyLittleThing revenue up 305% on a comparable basis to £30.7m and a 146% rise in active customers at PLT to 1.6m. Again though, there was a margin dip (to 53.8% from 57.3%)
Its other acquired operation is making less of an impact so far but the company did signal that sales are rising. The US-based fashion business saw revenue of £2.9m and a gross margin of 69.9% with were no comparable figures as Boohoo only acquired the brand recently.
Back with he company as a whole, its upgraded outlook came as a result of the very strong trading momentum in Q1, which means it now expects group revenue growth for the full year to February 2018 to be around 60%, ahead of previous guidance. That means its earlier guidance of revenue growth approaching 50% has been radically revised, although it expects EBITDA margins to stay in line with previous forecasts at around 10%.
Joint CEOs Mahmud Kamani and Carol Kane said the performance in the first quarter “has been very encouraging across all brands and geographic regions.” While it is early in the financial year, Boohoo clearly continues to perform well and PrettyLittleThing delivered “exceptionally strong revenue growth in the first quarter as it continues to expand its young female customer base.”
They also said Nasty Gal has made “a promising start since we acquired the brand, with revenues growing strongly month-on-month, as we increased the product range.”
Boohoo said it has successfully migrated the majority of its English language markets on to a new website platform, which is improving its speed and functionality. Additional office space adjacent to the Manchester head office, accommodating both Nasty Gal and Boohoo functions, is on schedule for occupation in July. And PrettyLittleThing has “added to its people talent base with a number of new appointments to execute its growth strategy.”
And what about that £3bn turnover strategy? The construction of the second warehouse extension at the firm’s Burnley site is under way and is expected to be complete in early 2018, adding 900,000 square feet of storage to the existing 996,000 square feet. This will provide sufficient capacity for a £1bn net sales operation. But with the growth rates of the group's brands accelerating, Boohoo on Wednesday announced plans to build a new automated super-site of over 600,000 square feet, which will provide it with over £2bn of net sales capacity, in addition to the £1bn provided by the extended Burnley location.
The land acquisition of the new site, together with the construction, will cost around £150m over three years so capital expenditure guidance has also been revised upwards (this year it will spend £63m compared to expectations of £34m earlier, it said).
This is where the new capital raising comes in. To “enable the group to maintain a strong cash position to be able to take advantage of investment opportunities,” it announced separately an equity placing to raise the money.
In short, it is tapping existing and new institutional investors by issuing new shares and, if the demand is high enough by selling 36.6m Existing Ordinary Shares. Going CEO Mahmud Kamani is selling up to 11.3m of these.
All told, the announcements made of Wednesday bore witness to a business that’s in a dynamic growth mode and which is defying the tough times in the fashion retail sector. Despite uncertain times ahead for the clothing and accessories market, Boohoo seems to be confident that it can continue to defy those conditions.
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