Boohoo sales boom as it benefits from lockdown
Sales at online fashion group Boohoo soared by 41% in the year to 28 February as its agile model saw it benefit from the Covid-19 lockdowns with analysts predicting it could capitalise on "going out" outfits as restrictions lift.
The rapidly expanding group reported revenues of £1.75bn in the 12-month period with profit before tax up 35% to £127.4m. Adjusted EBITDA hit £173.6m, up 37%, leading to an EBITDA margin of 10%, despite significant investment and "Covid headwinds". The group now has 18 active customers, up 35%.
All territories posted strong growth with UK sales up 39% and international sales up 44%. International sales now account for 46% of total sales. The group finished the year with net cash of £276m leaving plenty of scope for further investment.
During the year Boohoo capitalised on the high street turmoil brought about by the pandemic snapping up the Oasis and Warehouse brands from liquidators at the start of the crisis. It then acquired the Dorothy Perkins, Burton and Wallis brands from the collapsed Arcadia Group followed by the Debenhams.com domain and brand name, which it will use to create an online department store offering home and beauty, as well as fashion. The acquisitions saved a total of 1,000 jobs.
It has also made significant changes to its supply chain, following accusations of mistreatment of staff at factories in Leicester, which supply the group. Hundreds of factories have been deselected as a result and retired judge Sir Brian Leveson has been hired to oversee its Agenda for Change programme.
In addition the business acquired a third distribution centre in Daventry, formerly operated by Arcadia, to support its continued growth and says it will be operational this spring, and has also announced the purchase of a £72m property in London's West End to act as the Manchester-based group's HQ in the capital.
Looking forward Boohoo expects revenue growth for the full year to February 2022 to be around 25% at a group level, with newly acquired brands expected to deliver approximately five percentage points of this growth.
Growth within its established brands, which include BoohooMAN, PrettyLittleThing, Nasty Gal, Karen Millen and Coast, remains strong and over the last two years the group has achieved a revenue CAGR of 42%.
Trading in the first few weeks of the financial year has been "encouraging", however, the group noted that the economic outlook remained uncertain and that it expected the benefits seen from reduced returns over the last 12 months to "begin to unwind this year", while still experiencing "significantly elevated levels of carriage and freight costs".
The group said it was beginning to see the benefits of lockdown restrictions lifting as consumers returned to buy more going-out attire and Boohoo said its established "test and repeat" model would ensure it was well placed to capitalise on any rebound in demand globally.
John Lyttle, CEO, commented: "FY21 has been a year of significant investment for the group as we build a platform for the future and I am very pleased to report a strong financial performance. Our established businesses have continued to grow across all territories as we gain market share with our compelling consumer proposition. We completed over £250 million of acquisitions in the period, which included Oasis, Warehouse, Debenhams, Dorothy Perkins, Burton and Wallis, as well as the purchase of the remaining minority interest in PrettyLittleThing in a transaction that to date has resulted in substantial earnings enhancement for the group's shareholders.
"Our newly-acquired brands are being re-energised and made relevant for today's consumer across a broader market demographic. We are very excited about their potential and are already seeing the early rewards from their growth. We have also invested in improving the oversight and transparency of our supply chain and we are committed to embedding positive change through our ambitious UP.FRONT sustainability strategy. As we build for the future, we continue to invest across our platform, people and technology to further cement our position as a leader in global fashion e-commerce."
Mahmud Kamani and Carol Kane, Group Co-Founders, added: "Over the last year the group has made great progress, delivering another set of record results despite the challenges posed by the COVID-19 pandemic. We have made significant progress on our Agenda for Change programme, with greater oversight of our supply chain, stronger governance and more transparency. We are embedding a new way of working and improving the sustainability of the group for the benefit of all stakeholders."
Harry Barnick , Senior Analyst at primary research firm Third Bridge, said of the performance: "Boohoo has been a clear lockdown beneficiary thanks to its ubiquitous online presence and agile supply chain arrangements."
“Boohoo's FY21 sales accelerated 41% as Covid kept bricks and mortar competitors closed and rewarded online fashion giants able to pivot from party dresses to pyjamas."
"Boohoo's supply chain has been a defining characteristic of the company over the last 12 months. It is both a strength, allowing Boohoo to quickly hoover up the latest TikTok styles, and a weakness, causing brand damage due to controversy around working conditions in the UK and abroad."
"Boohoo now has the complex job of cleaning up its global manufacturing practises whilst ensuring it retains its competitive edge as the fastest and cheapest player in the market. It will need to be whiter than white in the medium-term if it is to avoid being permanently sullied by questions around its operations."
"As lockdown eases in the UK, Boohoo could benefit from a resurgence in 'going out' clothing categories, with younger customers flocking to festival wear and summer staples."