Boohoo to buy Warehouse, Oasis; FY revenue to beat market views

Fast-fashion retailer Boohoo said on Wednesday that full-year revenue growth is set to beat market expectations, as it announced the acquisition of the online businesses and intellectual property of Oasis and Warehouse for £5.25m in cash.

Boohoo - which owns PrettyLittleThing, Nasty Gal, Coast and Karen Millen - has agreed to buy the businesses from retail investor Hilco Capital, which acquired the brands and stock of Oasis and Warehouse when they collapsed into administration in April.

The company said it will integrate both businesses onto its platform in the coming months, allowing them "to benefit from the group's insight, infrastructure, supply chain and operating model".

For the three months to the end of May, Boohoo posted a 45% jump in group revenue to £367.8m, with revenue in the UK up 30% to £183m, while the rest of Europe saw a 65% increase to £63.4m. In the US and rest of the world, revenue rose 83% and 22% to £92m and £29.4m, respectively.

There was strong underlying growth across Boohoo, PLT and Nasty Gal, it said, while newer brands MissPap, Karen Millen and Coast continue to trade strongly, having successfully integrated onto the group’s platform last year.

For the current financial year ending 28 February 2021, Boohoo said it expects to deliver "another year of strong profitable growth, and ahead of market expectations". Revenue growth is expected to be around 25%, with an adjusted EBITDA margin of 9.5% to 10%.

"This guidance reflects our expectation for an ongoing period of consumer uncertainty, likely promotional intensity in markets in which we operate, as well as continued near-term carriage inflation for some of our overseas markets," it said.

Chief executive officer John Lyttle said: "During unprecedented and challenging times, the group has delivered a very strong trading and operational performance.

"Whilst there is a period of uncertainty within the markets in which we operate, the group is well-positioned to continue making progress towards leading the fashion e-commerce market globally."

At 1350 BST, the shares were up 9.8% at 427.30p.

Broker Liberum, which reiterated its 'conviction buy' on the shares, said: "While this performance has no doubt benefited from the group’s main bricks & mortars competitors being closed, it truly is a standout performance."

It added: "Our view on the announced acquisitions, just as with those in the past, is that they are decent brands, albeit in need of some rejuvenation, but where the costs bases had become far too large making the businesses unviable. Boohoo has the ability to strip these costs right down and leverage its own supply chain, infrastructure and systems."

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said it was up to Boohoo to rejuvenate Oasis and Warehouse and hope they resonate well with its traditionally younger, more fashion-forward customer base.

"It’s a similar move to the Karen Millen and Coast acquisitions, but while we’ve heard trading’s going well with these additions, we haven’t had any numbers to crunch, so it’s hard to say what the big picture looks like.

"Acquisitions are an important tool in Boohoo's armoury, because the share price valuation demands exponential growth, and there’s only so much fuel left in the tank of the flagship brand. What will be interesting is how many further buying opportunities are kicked up by coronavirus.

"We can expect a handful of struggling retailers to fold in the coming months, and Boohoo’s cash-laden balance sheet means it will be able to pounce."