The only ones crying at Boohoo are investors who failed to buy
MAHMUD Kamani and Carol Kane have form. Throughout much of the 1990s, the duo worked together to supply high street retailers with the latest fashion items for customers.
Having built an understanding of the market and an enviable distribution network, they founded their own retail business, Boohoo, some ten years ago.
The Manchester-based business was exclusively online from the start – its name was devised at a time when Google and Yahoo had created a trend for double-O brands.
Sales were slow at first but Boohoo began to rocket, once Kamani and Kane gained experience of how ecommerce works and how quickly word can spread, especially among Boohoo’s target 16 to 24-year-old market.
The firm floated in March 2014 at 50p. Today the shares are 187¼p and should increase materially as Boohoo takes market share from less agile competitors, encourages existing customers to spend more, and expands overseas.
When Boohoo joined the stock market, its annual turnover was £110million and its profit £8.4 million. The business has grown in leaps and bounds since then. In the 12 months to February 2017, Kamani and Kane delivered sales of £295 million and profit of almost £25 million. This year, turnover of more than £550 million is expected, alongside profits of about £45 million. Unlike Asos, its much larger online rival, Boohoo only sells its own brands. Initially, there was just the eponymous Boohoo brand. Then two more were acquired, Pretty Little Thing and Nasty Gal. All three appeal to the youth market, but each has a slightly different nuance and each has its own website. Crucially, sales are roaring ahead in all three divisions. Boohoo has gained a reputation for savvy marketing and distribution, using social media channels such as Instagram and Facebook to showcase its wares and gain endorsement from celebrities, such as singer Miley Cyrus and actress Bella Thorne.
The retailer has more than six million active customers, who are offered a choice of 35,000 styles, with new stock arriving every day. Prices are low, often below £20, delivery is quick and UK returns are free, so the buying process is stress-free.
Boohoo is expanding abroad, gaining customers as far afield as Australia, as well as on the Continent and in Ireland. All sales are processed from a million square foot, five-storey warehouse in Burnley, Lancashire. This warehouse is due to double in size and overseas centres are likely to open in time.
Other brands may join the Boohoo stable but expansion is likely to be measured.
Midas verdict: Boohoo is valued at more than £2billion but Kamani and Kane are keen to expand the company further, turning it into a worldwide fashion phenomenon. Progress has been encouraging to date, but there is plenty more to come. At 187¼p, the shares have done well since the flotation, but they are off their summer peak, following short-term concerns over profit margins. These should be ironed out over time. Buy.