Boohoo reports jump in first half profit and revenue

Boohoo, the UK based online retailer, has had a successful first half with its sales expanding more than expected.

The group’s revenue rose 40% to £127.3m, beating Shore Capital’s forecast of 37.6%. Profit before tax rose 129% to £14.4m.

Majority of the group’s sales came from the UK, which saw revenue rise by 38%. However sales abroad have been increasing by a greater degree, particularly in the US where revenue gained 93%, followed by Europe and Rest of the World with a 41% and 17% increase respectively.

“Top-line growth was well diversified, with all territories growing at a double digit rate; however Boohoo’s performance in the US was the standout. US sales accelerated during the first half, achieving a near two fold increase, seemingly benefitting from a more defined proposition in the region as well as currency tailwinds,” said Shore Capital anlayst George Mensah.

The firm’s active customer base grew 28% to 4.5m with the number of orders rising 32% to 5.1m. The number of items per basket increased 4.4% to 2.86 items and the average order value increased from £33.91 to £37.16.

Gross profit rose 29% to £70.5m whereas gross margin fell 480 base points (bps). The firm attributes 350bps of the fall to planned investment in price and promotions and 130bps to third party revenue.

Earnings before interest tax and amortisation (EBITDA) rose 117% to £16.5m, which was 13% of revenue reflecting efficiency improvements.

Cash at period end rose to £67m from £60m in the previous period.

According to the firm, the depreciation of sterling since the Brexit vote has had not “significantly” affected results due to foreign exchange hedges placed several months in advance as part of the company’s rolling hedging programme. The weaker sterling does, however, provide the opportunity to use promotional activity to generate incremental international sales over and above hedged transactions.

Mahmud Kamani and Carol Kane, joint CEOs, said: "We are pleased to report a strong performance in the first half of the year, with robust growth across all regions and continued momentum in new customer growth.

"We now expect revenue growth for the full year of between 30% and 35%, reflecting tougher second half comparatives. We will continue to look for opportunities to invest in marketing campaigns and our customer proposition to drive future sales growth and improve customer lifetime value. Consequently EBITDA margin for the full year is expected to be around 11%."

The company is currently evaluating whether to acquire fellow online retailer PrettyLittleThing before March 2017.

Retail analyst Nick Bubb commented: “Today’s interims from mighty Boohoo are notably strong and will drive further full-year profit upgrades, so it is not beyond the realms of possibility that the share price of our shrewd 'Tip of the Year' could top 100p today, notwithstanding the incredibly good run they’ve had over the last couple of months!”

Analysts at Shore Capital have increased their sales growth estimate for 2017 towards the higher end of the guidance range as well as nudged up their profit estimate. They are confident in the growth prospects of Boohoo and reiterated a 'buy'recommendation on the stock.

Earnings per share rose 124% to 1.01p. The share price stayed flat at 97.75p at 0941 BST on Tuesday.