Boohoo warns of slowdown in revenue growth

Online fashion group Boohoo has warned of a slowdown in revenue growth this year after a bumper pandemic fuelled by sales of casual and athleisure wear.

It said it expected group sales to rise 25 per cent, less than the 29 per cent forecast by analysts, as strong comparative figures and renewed competition from traditional fashion stores partly offset the expected return of a “feelgood factor”.

Finance director Neil Catto said that growth would also be biased towards the second half of the year as daily life in many countries reverts to something more like normality.

Foreign holidays and indoor hospitality — key drivers of purchases among Boohoo’s young customer base — are expected to restart in the UK this month and most restrictions are due to end in June.

But store-based rivals such as Primark, Next and New Look reopened in April and are likely to remain open unless there is a third peak in infections.

For 12 months to February 2021, Boohoo group sales rose 41 per cent year on year to £1.75bn, helped by the repeated closures of rivals’ store estates along with higher sales of casualwear.

This was more than enough to offset lower sales of dresses and party wear, while lower return rates in casualwear helped ameliorate the costs of Covid-19 compliance in warehouses.

Adjusted pre-tax profit was £150m, up 38 per cent and in line with forecasts.

Newly acquired brands such as former Arcadia labels Burton, Dorothy Perkins and Wallis along with Debenhams, are expected to deliver approximately 5 percentage points of sales growth in the current year.

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Catto said that with past acquisitions, sales in the first full year of ownership had tended to be around what Boohoo paid for the brand rights — in this case, £25m for the Arcadia stable and £55m for Debenhams.

This year will see heavy investment in logistics to support the brands; Boohoo expects capital spending of up to £175m on top of £72m already spent on an office building in London. Comparable spend in the year just ended was £49m.

Wayne Brown, an analyst at Liberum, said the company “has always historically been conservative in its guidance at the start of the year”. Boohoo’s first estimate of sales growth for the year just ended, made in June last year, was also 25 per cent but was upgraded several times.

The US was a standout performer; full-year sales there grew 63 per cent to £453m. Chief executive John Lyttle said the group could continue to supply that market from the UK for “another couple of years” despite increased air freight costs and growing volumes.

Boohoo no longer discloses sales by brand but Catto said that PrettyLittleThing, which the group now owns outright, had “an extremely strong year” and that BoohooMAN sales were also very strong.

Shares in the group, which have yet to fully recover from further revelations about working conditions in its supply chain last July and the departure of its then auditors, were down slightly in early trade in London.

Brown said this might reflect lingering concerns about the costs of improving supply chain practices. The company has instigated an “Agenda for Change” which is being overseen by Sir Brian Leveson, the former judge who oversaw the inquiry into Britain’s phone hacking scandal. It said the overall £15m cost of supply chain actions was included in its profit guidance.

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“If Boohoo can adequately deal with its [environmental, social and governance] issues, there remains significant upside to the share price,” said Brown.


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