No tears at Boohoo as menswear, celeb links and global growth mean smiles all round

By

Sandra Halliday

Published
Sep 27, 2017

Revenue up 106%. Gross profit up 99%. Operating profit up 42%. Pre-tax profit up 41%. Adjusted Ebitda up 58%. Now pause for breath. That was the pretty stunning set of figures at Boohoo.com Wednesday as the fast fashion e-tailer showed that its growth engine isn’t running out of steam.

The company reported a set of six-month figures that showed its core offer continuing to sell well, its specialist sizes making a major impact, its still-new menswear becoming an important part of the mix, and international growth really taking off, whether driven by initiatives like faster, easier returns in the US or a new French website.

But, the downside to all this was that the adjusted Ebitda margin at 10.6%, was down 240 bps and the gross margin at 53.3% was down 200 bps.

The company, reporting figures for the six months to August 31, clearly focused on carving out market share and was happy to sacrifice profits in order to do that. Not that its profit figures were disappointing. The business, which is still only a decade old and less than a year old as a multibrand group, remains one that high street rivals should be nervous about.

Let’s look at those figures in detail. The revenue rise saw sales more than doubling to £262.9 million while gross profit virtually doubled to £99.5 million. The 42% operating profit rise took it to £20 million and the pre-tax profit rise saw it at £20.3 million. Adjusted profits on an Ebitda basis hit £27.8 million.

The company benefitted from exchange rates but that 106% revenue rise was barely dented when looking at sales on a currency-neutral basis - they rose 101%. And it said that the 200 bps fall in the gross margin was in line with planned investments in the customer proposition.

Importantly, it has a strong balance sheet with net cash of £119.2 million, up from £67.1 million a year ago, following a £50 million share placing and so has plenty of cash to continue investing in growth.

That will include “significant” investment in IT and warehousing and should help feed through to full-year results that have been revised upwards. It had predicted revenue growth of 60% for the year but is now backing an 80% rise.

MULTIBRAND GROUP

Of course, Boohoo is more than just the single brand website that it was this time last year. In the last 12 months it has bought smaller peer PrettyLittleThing and also taken over the Nasty Gal brand. So how are its individual brands faring?

In H1, specific Boohoo revenue rose 43% to £181.8 million (40% currency-neutral). Revenue growth from the brand is expected to be at the upper end of previous guidance at around 30% for the year. Mobile device use has risen to 70% of sessions.

It has driven growth with heavy IT spend and also with marketing investment in a mix of media, including social media influencers, bloggers, TV, outdoor, email, student campus tours and events. 

Love Island celebrities have been working with it on several shoots and Jess Woodley from Made in Chelsea is now one of it UK brand ambassadors. BoohooMan increased its TV advertising now that the brand is reaching a significant audience. It also released a design collaboration with Tyga and a collection featuring Love Island winner, Kem Cetinay.

That helped boost active customer numbers 29% to 5.8 million while the number of H1 website sessions grew 20% to 158 million. Order frequency was flat with customers placing an order with it, on average, 2.11 times in 12 months, but the number of items per basket rose 11% to 3.17. Conversion rate to sale also improved from 3.9% to 4.1% of sessions. 

New product initiatives did well for the brand in H1. Its plus size, curve, petite and menswear categories saw the highest sales and strongest growth. The newer BoohooKids, maternity, lingerie and tall ranges are also showing “high rates of growth.”

The latest introduction (in July) was Boohoo Premium limited edition occasionwear that sells at higher price points. It’s still early days for this line so it will be interesting to see how it performs over the all-important Christmas period. 

And while marketing and product launches have been key to Boohoo’s recent success, the company has also been working behind the scenes to improve the customer experience. US customers now receive refunds once the return has been handed to the delivery service and this will also be extended to other territories in H2.

SMALLER BRANDS

Over at PrettyLittleThing, the revenue rise was stratospheric in H1, surging 289% to £72.7 million. It expects full-year growth of 150%, double the 75% it had predicted earlier. Its growth was strong both at home and abroad.

Sales across all geographic regions “increased dramatically,” it said and international sales were nearly seven times higher than in the first half of the previous year.

A French language website was added this year, taking the number of country-specific sites to eight. It has also improved the delivery times to the US and Australia, as well as reducing the costs on a number of international routes. Significant enhancements planned for the second half of the year include returns portals for international customers, a new customer relationship management system and click and collect delivery services.

Meanwhile, at Nasty Gal, revenue was £8.4 million, “increasing month-on-month from start-up in March.”

The company said it’s “very pleased with the growth in sales outside of the USA, where Nasty Gal predominated under its previous ownership, and this is supporting our view of the international appeal of the brand.” It has invested heavily in marketing to increase brand awareness and re-energise the brand, concentrating on the key markets of US and UK. It has also increased the product to a comprehensive offering of clothing, shoes and accessories.

What that all leaves us with is a business that’s very different from just a year ago. It’s now a multibrand group with the company saying the integration of the two acquired brands has been “successful,” adding diversity to the business while “enabling us to draw upon our strengths in marketing, sourcing, operations and customer service to deliver profitable results and greatly increasing the group's potential.”

Its growth is clearly set to continue but for how long it can maintain the spectacular growth levels it has reported recently is open to question. On today’s evidence, we wouldn’t like to bet on a slowdown any time soon.