The Boohoo share price has fallen by 2.3% today despite yesterday’s announcement by the fast-fashion retailer that it had recorded 41% growth in sales over the 12 months to the end of February this year. The onset of the pandemic rapidly accelerated the pre-existing trend towards online shopping, with Boohoo among the biggest beneficiaries. The company’s young demographic splashed the cash on what the retailer referred to as “lockdown outfits”, despite the economic uncertainty.
The company yesterday announced total sales of £1.745 billion over the year to the end of February – a significant leap on the £1.23 billion generated over the same period a year earlier. That drove a 35% increase in pre-tax profits to £124.7 million.
2021 is also looking good for Boohoo after the company offered forward guidance of expected sales growth of 25% over the same twelve months to the end of February 2022. Shoppers sprucing up their wardrobes for the end of lockdown and a return to socialising is expected to boost sales of ‘beer garden’ and party outfits.
The share price fall today was, however, presumably sparked by Boohoo’s warning over uncertainties around the future economic outlook. The company also expects return rates to return to closer to their pre-pandemic levels.
Profits have been boosted in recent months by lower return rates as the habit of buying items in several sizes and keeping only the best-fitting one receded. Shoppers are less pretentious about the exact fit of loungewear, which anyway tends to be looser fitting than they are about the clothing they intent to wear in public and to special occasions. Higher freight costs as a result of Brexit are also expected to drag on overseas profits.
The Boohoo share price has bounced back from last year’s scandal over the treatment of workers at Leicester factories manufacturing Boohoo’s fast-fashion lines as sub-contractors to companies the fashion business had contracts with. It had dropped 50% but has recovered with young shoppers largely remaining loyal to the company’s online brands.
Strong sales figures over the past year have given Boohoo the confidence to spend £250 million on acquisitions including fallen high street brands Debenhams, Dorothy Perkins, Oasis, Warehouse and Wallis. The company also bought out the share of the Pretty Little Thing brand run by Boohoo co-founder Mahmud Kamani’s son Umar Kamani it didn’t already own.
Chief executive John Lyttle commented on the new brands:
“We are very excited about their potential and are already seeing the early rewards from their growth.”
Analysts at investment bank Jefferies wrote in a note to investors:
“Boohoo remains a compelling long-term growth story and, with ESG risks receding, we reiterate our ‘buy’ recommendation”.
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