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Boohoo lauds PrettyLittleThing

The fashion brand isn’t so little anymore
April 24, 2019

Management at Boohoo (BOO) says it hasn’t seen a fashion brand grow as quickly as PrettyLittleThing. Sales, which represent 44 per cent of the group total, were up 107 per cent in the year to February 2019. It's impossible to maintain growth rates of this magnitude as brands mature, but the online retailer's top-line growth is guided at 25-30 per cent for FY2020.

IC TIP: Buy at 228p

Sales growth in the retail sector isn't always matched by commensurate growth in profitability, so both shareholders and analysts will find satisfaction in the 190 basis point improvement in the gross margin, which fed through to a 49 per cent increase in cash profit to £84.5m.

It remains a highly cash-generative business model. Free cash flow more than doubled to £65.1m in the year, leading net cash to climb 43 per cent to £191m. This may have been aided by the net £52.6m increase in trade/payables over receivables.

However, those hoping for a dividend will be disappointed. Chief financial officer Neil Catto said the group had “lots of plans for investment”, whether through acquisitions or investment in existing brands.

Peel Hunt is forecasting adjusted pre-tax profits of £88.9m in FY2020, giving EPS of 5.5p. This compares with £76.3m and 4.15p in 2019.

BOOHOO (BOO)   
ORD PRICE:228pMARKET VALUE:£2.66bn
TOUCH:228-228.5p12-MONTH HIGH:248pLOW: 146p
DIVIDEND YIELD:nilPE RATIO:70
NET ASSET VALUE:22pNET CASH:£191m
Year to 28 FebTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201514011.10.80nil
201619515.71.10nil
201729530.92.20nil
201858043.32.78nil
201985759.93.27nil
% change+48+38+18-
Ex-div:na   
Payment:na