Boohoo's strong H1 spikes hopes for a new market´s darling

Thursday, 16 October 2014
ANALYSIS_ It is noteworthy that Boohoo posted interim results for the first half of the year on the back of analysts at Barclays predicting the company can double its UK sales in the next three years. On Tuesday, Bohoo confirmed these figures. revealed that the group’s revenue for the six months to August rose 31 percent to 67.2 million pounds, ahead of previous year´s same period´s 51.4 million pounds.

“Boohoo is a strong emerging clothing brand offering exposure to the structural growth dynamics of the global online clothing market. Boohoo’s supply chain and ability to bring new fashions to market quickly give it a competitive advantage. Stability of its high gross margins is underpinned by its exclusively own-branded business model and the prior track record of its two CEOs as Primark’s suppliers,” said analysts at Barclays in a note earlier this week.

In the same line, in its pre-close trading update, Boohoo said half-year sales were up 31 percent to 67 million pounds and trading was in line with expectations.

Solid UK sales growth and strong expenses control boost Boohoo´s H1 results

"During the current quarter we have managed our marketing spend and growth during the implementation of the warehouse management system and the launch of the fully responsive mobile website. Following the successful execution of these key initiatives, our marketing spend has again increased in line with our targets and we continue to trade in line with market expectations for the full year," explained the company´s management.

Pre-tax profit for the first half improved by 23 percent increase to 4.5 million pounds, compared to 3.7 million pounds a year earlier, while adjusted earnings before interest, depreciation and amortisation (EBIDA) came in at 6.8 million pounds, reflecting investment in expenses to support future growth.

UK revenue represents 68 percent of total revenue for the company to date, with sales revenue up by 47 percent. In the rest of Europe, sales grew by 43 percent, supported by the introduction of new foreign websites in Spain and Germany. In France, revenues rose in excess of 250 percent over the period, the company highlighted in a statement.

"Our focus remains on further expanding our international footprint while growing sales in the UK,” pointed out joint chiefs Mahmud Kamani and Carol Kane in this regard.

Boohoo´s shares at the rise after poor first months of trading floated in March with a valuation of 560 million pounds, but shareholders have suffered a declining share price despite positive results as tough trading conditions for retailers continues to impact the overall sector.

The stock has been down 14 percent from the 50 pence it floated at in March. After reporting a 23 percent rise in pre-tax profit to 4.5 million pounds in the six-month period to August 31, Boohoo’s share price almost 5 percent higher, to trade in the region of 44.25 pence.

As reported by the ‘Financial Times’, Ben Robertson, head of investor relations, said he was confident of further strong growth after “investing a lot in infrastructure and people” over the past year. “Our half-year profits are ahead of where we’d expected them to be,” he said. “There’s no reason we cannot continue to grow in the second half of the year.”

Off the back of these results, PLC (LON:BOO)‘s stock had its ‘buy’ rating reiterated by research analysts at Oriel Securities Ltd. They currently have a 72 pence price target on the stock, which indicates a potential upside of 60.89 percent from the company’s current price. As an indication, it is worth noting that PLC has a one year low of 36 pence and a one year high of 85 pence.

A number of other analysts have also recently weighed in on the stock, with Investec reiterating a ‘buy’ recommendation on shares of PLC in a research note on Tuesday (their price target is set to 85 pence). Separately, analysts at N+1 Singer reiterated their ‘buy’ rating on Boohoo´s shares. Discrepant note came from analysts at Barclays, who initiated coverage on shares of PLC in a research note on Thursday, October 9th by setting their rating as ‘overweight’.

Angela González Rodríguez

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