Boohoo shares surge as it lifts full-year guidance

In a brief and unscheduled update, the company said trading in the first half of the year had been ahead of expectations, with strong revenue growth driving operating leverage across its key brands.

As a result, it now expects full-year group sales growth of between 33% and 38%, up from previous guidance of between 25% and 30%.

EBITDA margins for the financial are expected to remain at around 10%, in line with previous guidance.

At 1200 BST, the shares were up 14.5% at 278.66p.

Neil Wilson, chief market analyst at Markets.com, said the "solid" trading update from Boohoo shows "it's not all bad in retail".

"Boohoo continues to defy the broader gloom on the high street thanks to its appeal among younger shoppers, its tight marketing and laser focus around celebs and social media. There are doubts though about whether it can maintain margins as well as this rapid sales growth, but for now it's one of the top performers.

"In June, the company reported a small 20bps drop in gross margins. Boohoo margins firmed up to 54.1%, but margins as PrettyLittleThing and Nasty Gal were weaker, so investors need to consider the start of a cycle of margin declines. But whilst sales growth remains this strong, any small drop in margins can be easily overlooked."

Russ Mould, investment director at AJ Bell, said it's "very encouraging" to see Boohoo raise guidance.

"While it doesn’t match the levels seen in the previous financial year, it does provide some reassurance that Boohoo isn’t struggling like much of its peer group. Equally positive is the fact that margins aren’t being squeezed which suggests it isn’t slashing prices simply to shift stock and push up sales.

"The company is clearly on a roll and offering customers a wide range of products which are seemingly ‘on trend’ and at the right pricing point.

"Shareholders are lapping up the benefits of this successful business model. Boohoo’s shares are now at a new record high and it is comfortably the biggest stock on the AIM market at £3.3 billion; that is now significantly ahead of fashion rival Asos's £2 billion valuation."

Graham Spooner, investment research analyst at The Share Centre, said Boohoo's update could reignite some confidence in the retail sector following Marks & Spencer's demotion from the FTSE 100.

"Boohoo remains the only retailer that The Share Centre has been positive on and feels that the shares could remain a ‘pretty little thing’ over the medium-term," he said.