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Boohoo raises full year guidance with strong interim results (BOO)

The share price of UK online retailer Boohoo (LSE:BOO) gapped up this morning on the release of its interim results, having risen 8.5% at the time of writing. Revenue was up 50% in the 6 months prior to 31st August 2018 compared with the same period last year, while profit before tax climbed 22% to £24.7m. Growth in UK sales was up 43% with international sales, now accounting for 41% of group revenue, rocketing 62%.

The biggest gains were attributed to the group’s PrettyLittleThing, and Nasty Gal brands, up 132% and 111% respectively, with the former accounting for £168.6m of revenue. Boohoo has upped its full-year guidance for revenue growth from 35-40% to 38-43% maintaining growth in the UK, it’s largest market, remains very strong.

The group has achieved gains in market share across its key focus territories and claims brand awareness has heightened through successful celebrity associations and influencer campaigns. It also states faster delivery times, more delivery options and new payment methods have all contributed to the company’s success.

Boohoo’s stock price is currently sitting at 208p, quite some way off its 2017 high of 273p. Arguably the share price was getting ahead of its self with a very high P/E ratio at the time. A subsequent pullback saw the price almost halve when Boohoo hit 140p in March this year – no doubt, wider market concerns sparked by the global correction in January contributed to the size of the fall.

There had also been some concerns over potential disruption to sales during the PrettyLittleThing warehouse relocation, but evidently, growth for the brand remained very strong despite the move and the warehouse relocation has now been completed.

Also in today’s interims, the group reiterates its medium-term guidance to deliver sales growth of at least 25% per annum. That’s some claim, particularly when compared to the metrics of traditional high street stores, but as the success of ASOS has shown before, an efficient online offering can deliver exceptional returns for investors.  Boohoo has previously surmised that it is generating economies of scale because of its investments in marketing and warehouse automation, and with plans for further automation, this looks set to continue. The company announces today that automation of it’s Burnley site to drive future efficiency is on schedule.

A meeting for analysts was held this morning with a replay available from 12 noon today via the following link:

http://webcasting.buchanan.uk.com/broadcast/5b5882ccd3653708d12fdadf

Author: Stuart Langelaan

The author does not own shares in the company mentioned in this article

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