Boohoo in vogue after outlook raised
Boohoo had an impressive six months as revenue and pre-tax profit jumped by 50 per cent and 22 per cent respectively. The group saw strong demand for their brands at home and abroad, as the UK registered a 43 per cent rise in sales and the international division posted a 62 per cent rise in revenue. The overseas department now accounts for 41 per cent of group revenue, and it is encouraging to see that global demand is strong.
The balance sheet is robust and the net cash position has jumped by 30.5 per cent. The company upped its revenue guidance, and it now expects growth of between 38 per cent and 43 per cent, and that compares with the previous guidance of growth between 35 per cent and 40 per cent. Not many fashion houses have been raising their outlook, and the company is ahead of the traditional high-street retailers.
Boohoo had an impressive start to the year as in June the group posted a 53 per cent jump in first-quarter sales. The UK and US divisions saw sales rise by 49 per cent and 75% respectively. Boohoo acquired Pretty Little Things in 2016, and in the latest quarter the division accounted for 43 per cent of revenue, so it was clearly a sensible takeover.
The online fashion house raised £50 million in the summer to fund its expansion. The company is aiming to build a distribution network that will be capable of supporting £3 billion worth of net sales globally. Boohoo’s growth rates are impressive and the fact that it comfortably raised the funds suggests investors have confidence in the group.
The share price has cooled in the last 15 months as some investors are worried the firm’s growth rate can’t be sustained. John Lyttle, Primark’s COO was become Boohoo’s CEO in March 2019. Primark’s low cost clothing has bucked the trend of the wider disappointing retail sector. Boohoo’s success is partially responsible for the traditional fashion house struggling as online only store fronts mean higher profit margins. Mr Lyttle has been promised £50 million worth of shares if he can grow the share price by 180% over five years. The pay incentive will be a major motivator for Mr Lyttle.
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