Soon we’ll not be supporting this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

boohoo - full year guidance upgraded

George Salmon | 5 September 2019 | A A A
boohoo - full year guidance upgraded

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Boohoo Group Ordinary 1p

Sell: 260.60 | Buy: 260.90 | Change -5.40 (-2.03%)
Chart View factsheet

Market closed | Prices delayed by at least 15 minutes | Switch to live prices

Better-than-expected trading means full year sales are expected to grow 33-38%, ahead of previous guidance of 25-30%. Investments in new brands acquired in the first half, means cash profit margins will be around 10%, in line with previous expectations.

Further guidance will be given at half year results on 25 September.

Following the news, boohoo shares rose 16.5%.

View the latest share price and how to deal

Our View

boohoo's combination of popular collections and cheap price tags has cooked up a storm. We can't really knock its performance.

An exclusively online presence means the group can stock small quantities of lots of different styles, and ramp up marketing and stock for the most popular. This 'test and repeat' model means boohoo is ideally placed to keep up with the frantic pace of fast fashion. An online model also means expansion is easier than a bricks and mortar retailer, which helps boohoo pursue growth at a snappy pace.

The opportunistic approach to acquisitions is also a point in the group's favour, with the likes of PrettyLittleThing and Nasty Gal meaningfully boosting sales since they were bought in 2017. We don't know how the latest addition, Miss Pap, will fare yet, but so far boohoo's had a good eye, and upgraded forecasts suggests early signs are good.

All that potential comes at a price though. The shares currently change hands for a lofty 43.2 time s expected earnings, which means near-perfect execution will be needed to avoid the share price reacting. A lot is expected from the US market in particular, and growth here has slowed a bit recently. The smaller brands will need to keep delivering, and looking ahead, it's hard to see how sales momentum can be maintained without spending ramping up.

There are logistical challenges with growing fast too. Rival ASOS had issues with new US operations, leading to unforeseen costs. boohoo's managed its expansion well so far, but there are higher risks when things are moving this fast.

There are other challenges too. The retail environment is particularly tough, with profit warnings from rival online giant ASOS showing the troubles aren't just on the high street. boohoo's certainly managing to buck the trend, but tough trading conditions elsewhere means it's something to keep an eye on going forwards.

All-in-all, it's hard not to be impressed by boohoo's performance. Sales are racing, and if the group can manage its expansion plans and keep growing the international business fast enough to satisfy the share price, the group offers an exciting proposition.

Register for updates on boohoo

Trading details (figures at constant exchange rates) 12 June  2019

Excluding exchange rate effects, first quarter revenues increased 39% to £254.3m. However, revenue growth in the key US market slowed from 81% last year to 66%.

Revenue across all geographic regions increased year-on-year, with the biggest improvement coming from Europe (excluding the UK), up 71% to £38.3m.The USA saw a 66% rise, and the UK was 27% ahead of last year with revenues of £140.6m. The Rest of World region grew 28%.

boohoo's own-branded line posted a 28% increase in sales, compared to 10% growth seen at the same time last  year, reaching £123.5m. PrettyLittleThing saw sales rise 42% to £112.1m, and Nasty Gal revenues climbed 157% to hit £18.2m.

The group achieved a gross margin of 55% - which represents a slight decrease year-on-year.

In March 2019 boohoo added to its portfolio by acquiring the Miss Pap brand.

Net cash now stands at £194m, compared to £151m last year.

Find out more about boohoo shares including how to invest

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.