Online fashion brand posts £1bn+ turnover figures

John Lyttle

Manchester-based online fashion retail group Boohoo achieved impressive improvements to its annual figures for the year to February 29, released today, smashing through the £1bn turnover mark.

The business posted a 44% rise in revenues, to £1.235bn, while pre-tax profits of £92.2m were 54% better than the previous year.

Boohoo said it enjoyed strong revenue growth across all geographies with the UK up 39% and international up 51%. International revenue is now 45% of total, up from 43%.

It said it has a robust balance sheet with net cash of £240.7m (2019: £190.7m), and high cash generation with operating cash flow of £127.3m (2019: £111.9m).

Boohoo posted revenues of £600.7m, up 38%, the PrettyLittleThing brand saw revenues rise by 38% to £516.3m, while Nasty Gal revenues of £98.8m showed a 106% improvement.

During the year the group acquired the MissPap, Karen Millen and Coast brands, which it said are complementary additions to the group’s scalable, multi-brand platform.

Boohoo boasts 8.9 million customers, up 28% on the previous year. PrettyLittleThing has 6.3 million active customers, up 26%, and Nasty Gal 1.8 million customers, growth of 88%.

Looking ahead, the group saw a strong end to the financial year and in the first two weeks of fiscal year 2021 this trading momentum was maintained.

Since the middle of March, trading has been mixed, as a result of the impact of the COVID-19 pandemic, initially with a marked decrease in year-on-year growth.

Performance has improved in more recent weeks and the group is now seeing improved year-on-year growth of group sales during April.

It says it remains cautious regarding outlook, as a result of the uncertainty caused by the COVID-19 pandemic.

Given the uncertainty generated by the continually-evolving COVID-19 pandemic, it says it is not appropriate to provide guidance for the financial year ending 28 February 2021 at this stage.

It added: “The group has taken steps to understand, as far as possible, the risks and impact that the pandemic may potentially have on its operations, analysing a range of scenarios, factoring in a downturn in demand and the possibility of warehouse closures.

“Although it is not possible to predict precisely the impact from COVID-19, we have ensured that we have stress-tested our liquidity under these scenarios.

“From this, we are comfortable that the group has sufficient financial headroom, benefitting from its largely variable cost base, low cash burn rate and strong balance sheet with £241m of net cash at year end.”

Chief executive John Lyttle said: “Whilst recent events have understandably overshadowed what has been a great year for boohoo, they have also highlighted its key strengths.

“Our business is founded on our ability to be agile and flexible and it is at times like this when these abilities are tested, and I am proud of how our colleagues and business partners from around the world have responded to the challenges posed by this pandemic.

“Although there is near-term uncertainty in the markets that we operate in, the group is underpinned by its incredibly strong balance sheet and is well-placed to leverage its scalable multi-brand platform and to continue to disrupt fashion markets around the world.”

The business has been at the centre of a row over face masks it was selling and has now withdrawn following protests.

The £5 masks came with messages such as “Eat, sleep, isolate, repeat” or “If you can read this, you are too close”. The shopworkers’ union, USDAW, said they were “scandalous” and one NHS nurse said it was “disgusting”.

Today, USDAW said their withdrawal was a “small step in the right direction”, but continues to call for Boohoo to close its “unsafe” warehouse.

The union continues to raise staff complaints about what they claim are inadequate personal protection equipment (PPE) and working practices that don’t ensure necessary social distancing at the Burnley warehouse.

Mike Aylward, USDAW divisional officer, said: “Boohoo have rightly u-turned on their highly inappropriate and useless face masks, after healthcare workers and USDAW expressed their disgust at the attempt to profit from a national crisis.

“We now need the company to u-turn on their opposition to staff being represented by a trade union.

“We need to get round the table with managers to sort out a long list of serious concerns from our members about their health and safety during the coronavirus outbreak. They are terrified they may become infected with coronavirus and put their loved ones at risk.

“We also call on the Government to review their advice to online non-essential retailers. Their contradictory advice encourages online retailers like Boohoo to carry on regardless, while telling non-essential workers to stay at home.

“They have failed to understand that online retailing has to be fulfilled by thousands of warehouse workers and delivery drivers.

“We repeat our call on Boohoo – close the warehouse for the safety of their employees and their families. Do the right thing by furloughing workers, under the Government’s Coronavirus Job Retention Scheme, and to top up the 80% grant so that staff continue to receive their full wages as normal.”

Russell Mould, investment director at Manchester investment platform AJ Bell, said: “There were concerns that online fashion retailers would see a sharp drop in demand as the country went into lockdown, given that individuals no longer had a need for a new dress or shirt for a night out on the town.

“This certainly seems to have happened to Boohoo which reported a dip in trading from mid-March.

“Interestingly, it says sales have started to pick up again, despite the ongoing lockdown. One can only presume that people are bored at home and simply want the feel good factor of spending money on something new.

“There is also the consideration that people might want to look good for video conferencing, given the nation seems to have discovered Zoom and other video platforms and are now frequently communicating with friends and family that way.

“The fact that Boohoo’s website is still taking orders gives it an advantage over the high street retailers who have had to close their doors temporarily. However, there are still two negative factors which could cause it to stumble.

“Firstly, there is a risk that a likely increase in unemployment as a result of the coronavirus pandemic could hurt its customers’ ability or willingness to buy clothes at the same rate as before the crisis.

“Secondly, its model of fast fashion is rapidly going out of favour with the younger generation.

“The lower end of its 16- to 40-year-old target market is increasingly concerned about environmental issues.

“The idea that a company sells products which may only be worn once and then chucked goes against everything that many individuals in Greta Thunberg’s generation stand for. This may be a longer term headwind for the company to tackle, but the risk to earnings is very clear today.”

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