Boohoo confident in recovery, analysts agree after net cash surprise

Online fast-fashion retailer Boohoo Group reported revenue of £1.77bn in its final results on Tuesday, representing an 11% year-on-year decrease.

The AIM-traded company said its gross profit for the 12 months ended 28 February totalled £895.2m, down 14%, while its gross margin dropped by 190-basis points to settle at 50.6%.

Its adjusted EBITDA tumbled 49% to reach £63.3m, and its adjusted loss before tax was £1.6m, swinging from a profit of £82.5m in 2022.

Boohoo’s adjusted diluted loss per share was 0.02p, contrasting with earnings per share of 4.39p in the prior year.

The board reported a diluted statutory loss of 6.13p per share, representing a substantial decrease of 1,816%.

Despite the financial setbacks, Boohoo Group reported significant market share gains over the last three years, with sales increasing by 43%, and the UK market specifically growing 61%.

Boohoo said it also successfully implemented automation at its Sheffield operation, resulting in improved operational performance and substantial cost savings.

Boohoo Group made substantial progress in preparation for the phased launch of its US distribution centre later in the year.

Additionally, the firm reported a leaner, lighter, and faster inventory position, with a 36% reduction in stock compared to the previous year.

The financial report also highlighted Boohoo's strong cash generation, with a net cash balance of £5.9m at the end of the year, representing a £4.6m increase.

It achieved a net free cash flow of £30.2m, after investing £91.2m in capital expenditure to support its growth plans.

Boohoo also reported liquidity headroom of £330.9m at the end of the period.

The board said the company was looking to reinvest the margin improvements achieved through supply chain deflation into speed and price adjustments, further reinforcing its “test and repeat” proposition.

It said it expected a medium-term adjusted EBITDA margin of between 6% and 8%, and anticipated regaining double-digit revenue growth by leveraging its scale, unlocking cost deflation, and implementing overhead efficiencies.

“Over the last three years, the group has achieved significant market share gains,” said group chief executive officer John Lyttle.

“Looking ahead, we are investing for the future growth of this business with automation, local fulfilment capacity in the United States, and building global brand awareness.

“We will deliver sustainable returns on these investments.”

Lyttle said Boohoo would continue to give customers “the latest” trends, “outstanding” value and “a great” experience.

“Our confidence in the medium-term prospects for the group remain unchanged, and as we execute on our key priorities we see a clear path to improved profitability and getting back to double digit revenue growth.”

The shares were also getting a boost from an upgrade to ‘buy’ from ‘hold’ at Shore Capital.

“Our projected 2024 financial year EBITDA has been raised by 12%, and there is potential for further gains driven by margin improvements,” said research analysts at Shore.

“Despite a recent decline in boohoo's market share, the upcoming fiscal year offers favourable year-on-year comparisons, along with a streamlined inventory and the phased launch of a US warehouse, which are expected to boost the company's prospects.”

Peel Hunt, meanwhile, said the main surprise in Boohoo’s figures were its balance sheet, with net cash of £5.9m compared to its net debt forecast of £55m, and consensus expectations closer to £70m.

“The recent share price weakness led by Asos has clearly been overdone in our view, and we reiterate our ‘buy’ stance,” the broker said.

Concern over the online fashion sector deepened on Monday, with Asos shares tanking after Shore Capital suggested the Boohoo competitor might need to raise more cash soon.

At 0834 BST, shares in Boohoo Group were up 15.73% at 44.5p.

Reporting by Josh White for Sharecast.com.