Booming sales continue to boost boohoo Group
AIM-listed boohoo Group delivered a surprise update on Thursday, with better-than-expected recent trading.
Sales for the year to February are now expected to grow by 33-38 per cent, ahead of previous guidance of 25-30 per cent. Steady margins mean that should translate to an equivalent increase in profits. Following the news, boohoo shares rose 16.5 per cent.
This isn’t the first time boohoo has brought investors cheer. Since starting life back in 2006, a combination of popular collections, cheap price tags and canny acquisitions have helped the group grow into a £3.2billion giant.
An exclusively online presence means the fast fashion group is clearly well placed to capitalise on the trend towards online shopping, which is particularly popular in the key 16 to 24 age bracket.
However, there are other advantages to the group’s digital model.
By cutting out physical stores, boohoo can save rent and stock small quantities of lots of different styles – before ramping up stock for the most popular. This ‘test and repeat’ model means boohoo is ideally placed to keep up with the pace of modern clothing retail.
We’ve also been impressed with the group’s acquisitions, PrettyLittleThing and Nasty Gal. Forecasts suggest its latest addition, Miss Pap, will be successful, too.
The group is already profitable, and there’s potential for further growth. That helps justify a PE ratio of 48.8 times expected earnings.
However that lofty rating means near-perfect execution will be needed from here on in a tough UK retail environment. Conditions are better in the US, as shown by the fact that first quarter revenues rose 66 per cent.
Overall, sales are racing, and if the group can manage its expansion plans and keep growing the international business quickly, it will offer an exciting proposition.
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