Boohoo bumps up revenue guidance as sales rise

Fast fashion retailer Boohoo defied the retail gloom on Tuesday, upgrading its full-year revenue guidance following a solid end to 2018.

In the four months to the end of December, group total revenue rose 44% to £328.2m, beating analysts' expectations for a 41% jump.

UK revenue was up 33% to £180m, while revenue in the rest of Europe was up 57% to £44.4m, US sales rose 78% to £70.4m and sales in the rest of the world increased 35% to £33.4m.

Meanwhile, gross margin for the four months improved by 170 basis points to 54.2%, ahead of expectations for an 80 basis points increase.

Revenue at Boohoo grew 15% to £163.5m, while Nasty Gall saw a 74% increase in revenue during the period to £20.6m, and PrettyLittle Thing saw a 95% surge to £144.2m. Gross margin at each of the three brands rose. Boohoo's came in at 52.2%, up 150 basis points, while Nasty Gal's increased to 54.4% from 55.3% and PLT's margin pushed up 110 basis points to 56.4%.

Boohoo said it now expects group revenue growth for the year to 28 February 2019 of between 43% and 45%, up from its previous guidance of between 38% and 43%. In addition, it expects group adjusted EBITDA margins to be between 9.25% and 9.75%, narrowing the range from the 9% to 10% previously guided.

Joint chief executive officers Mahmud Kamani and Carol Kane said: "We are delighted to be reporting yet another great set of financial and operational results and would like to say a very big thank you to all our team and customers.

"We remain firmly focused on continuing to provide our customers with great fashion at unbeatable value. The global growth opportunity is significant and we will be addressing it in a controlled way - investing in our proposition, operations and infrastructure to capitalise on the opportunity."

At 0910 GMT, the shares were down 3.3% to 188.10p.

Independent retail analyst Nick Bubb said "the only slight disappointment is that operational gearing is not what it might have been", as the group narrowed the range for adjusted EBITDA margins.

Shore Capital analyst Greg Lawless said the update was strong and that Boohoo is "the one to own" in the quoted online UK fast fashion scene.

"We dock our caps to Team Boohoo in Manchester. Following this update we reiterate our 'buy' recommendation on Boohoo’s shares," he said.

"To our minds, Boohoo's performance sets the business apart from the other pure-play apparel players in the UK. In a remarkable turn of fortune the sub-sector has witnessed a nasty downturn in recent times with a quite remarkable, surprise and structural, profit warning from Asos but also substantial losses recorded by seemingly missguided Missguided and yet another warning from Quiz, also leading to a collapse in its share price and returns for investors in the IPO."

RBC Capital Markets analyst Sherri Malek said: "Boohoo continues to perform well despite a challenging backdrop, in part owing to its highly promotional strategy and where it is in its growth cycle.

"However, Boohoo's ambition to be the best-in-class internet fashion retailer globally will come at a price, in our view. We therefore believe incremental investment in the business is a question of when, not if, to sustain high levels of growth. Boohoo now trades at CY19e 2.0x EV/Sales compared to 0.8x of Asos and 0.9x of Zalando."