It’s not unusual for Boohoo (BOO) bosses to play it safe when it comes to predicting future performance, and it’s not unusual for the share price to fall in response. History repeated itself the day these half-year numbers hit the market. This time, it was margins that caught investors’ attention and, specifically, where cash profit margins might land when the group reports full-year results around April next year. For now, management says margins should be in the range of 9-10 per cent (compared with previous guidance of 10 per cent and the 10.6 per cent achieved in this period).
The squeeze is down to higher levels of investment – translated, that means keeping prices low while aggressively marketing new brands PrettyLittleThing and Nasty Gal. In fact, it’s the higher mix of sales from these recently acquired brands that are also contributing to lower margin performance.
This isn’t the only kind of investment on the cards. Boohoo raised £50m in June to help fund an expansion of its distribution arm, which includes a brand new 600,000 sq ft ‘super-site’. Management is currently picking out a location. This new automated warehouse facility, along with an extension to the existing site in Burnley – already under way and expected to complete by January 2018 – could increase net group sales to as much as £3bn.
But all this talk of investment managed to overshadow an otherwise impressive top-line performance across the group. For the main boohoo and boohooMAN brands, revenue grew by an impressive 43 per cent to £182m, while PrettyLittleThing grew sales by a whopping 289 per cent to £72.7m. The latter no doubt benefited from the brand’s association with the unexpected summer television hit ‘Love Island’, where several contestants wore items from the product range. NastyGal was bought out of administration in March, and bosses report that sales are increasing rapidly month on month.
Analysts at Peel Hunt expect pre-tax profits of £43.7m for the year ending February 2018, giving EPS of 3p, up from £30.9m and 2.2p in FY2017.
| BOOHOO.COM (BOO) | ||||
| ORD PRICE: | 234p | MARKET VALUE: | £2.69bn | |
| TOUCH: | 233.5-234.3p | 12-MONTH HIGH: | 273p | LOW: 97p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 96 | |
| NET ASSET VALUE: | 15p | NET CASH: | £119m | |
| Half-year to 31 Aug | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 127 | 14.4 | 1.0 | nil |
| 2017 | 263 | 20.3 | 1.3 | nil |
| % change | +107 | +41 | +24 | - |
| Ex-div: | na | |||
| Payment: | na | |||
