LON:BOO | Boohoo Results, 12 Months To 28 Feb 2021 - New Thread, 5 May 2021

5th May '21 by Paul Scott

119 comments 13341 reads

Good morning, it's Paul here with a new thread for discussion of results from Boohoo (LON:BOO) (I hold) due out imminently on 5 May 2021.

We decided a little while ago that the market cap of BOO at £4.3bn is much too high to continue discussing it in the Small Cap Value Reports (SCVR). Hence a separate discussion here will avoid cluttering up the SCVR for today, so please keep the discussion of BOO on this separate thread.

Just before the results come out, here's a quick summary of previous guidance, which we can use to measure performance today against:

Trading Update, 14 Jan 2021

Strong peak trading
4 months to 31 Dec 2020: 40% revenue growth
10 months to 31 Dec 2020: 42% revenue growth
Guidance for 12 months to 28 Feb 2021: 36-38% (raised from previous range of 28-32%), adj EBITDA margin c.10%
Medium-term guidance: 25% p.a. revenue growth, and adj EBITDA margin of 10%

Stockopedia shows broker consensus for FY 02/2021 of: 8.47p

Fingers crossed!

Useful links:

Click here for the presentation slide deck

Click here to view webcasts on video recording (select "view online")

Here are my notes from the actual FY 02/2021 results -

Revenues: up 40% - ahead of guidance of 36-38%
Adj EBITDA margin of 10.0% in line with guidance
Adj EPS 8.67p is a beat against broker consensus of 8.47p (2.4% ahead)
Adj EPS of 8.67p is up 47% on last year
Strongest growth geographically was in USA, at +65%

New guidance for FY 02/2022: 25% revenue growth (of which 5% from newly-acquired brands) - note that guidance tends to be raised as years progress.

Current trading - trading in first few weeks of new financial year has been “encouraging”

Returns rate - benefit from a lower customer returns rate in FY 02/2021 is expected to “begin to unwind”

Carriage & freight costs - significantly elevated, expected to continue

Lockdowns - mixed effects - some benefits (e.g. lower returns rate, less competition), but core product categories saw “significant declines” (i.e. not selling party/clubwear so much during lockdowns)

Re-opening - already seeing “early benefits” from this, i.e. resumption of sales in party/clubwear

Gross margins in established brands expected to be maintained

Adj EBITDA guidance: 9.5% to 10.0%, slightly lower than previous 10% guidance, due to investment required in new brands

Seasonality -…

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Paul Scott

7th May '21

Amazon will never crack fashion, in my view. It's too complex, and products/brands are not generic, so can't just be copied & sold in scale. For example, each brand has its own specific fit. Hence I know when I order Large in Next & Joules, it will probably fit me like a glove. Customers get to know their favourite brands, then stay loyal to that brand.

I would buy generic household items from Amazon, but never fashion items. If Amazon tackled this area, they would make a complete hash of it, in my view. Hundreds of thousands of SKUs, etc, 40-50% customer returns - imagine the logistics of doing this! They'll leave well alone, if they have any sense. Leave it to the experts.

Regards, Paul.

I've fallen in love with one thing about Boohoo (LON:BOO) - the numbers.

See the historic EPS below. I've put in yellow highlighter what I think could be possible once DEB kicks in (based loosely on Zeus forecasts, plus a bit more on top). This is a no-brainer. Downside risk? An online sales tax, and possible windfall tax, which would undoubtedly be a bump in the road, but as a coffee can stock that doesn't matter to me. It might matter to you, your choice.

Laughton

Ah but I'm not a fashionista.
I dare say I'll still be wearing Levi 501s when they cart me off.

MiserableJacktPotato

Sounds like a lot of effort for a scruffy pair of jeans. Each to their own.

Why don't you think keeping them all is a possibility? Their ambition is to make Debenhams a market place, so even if a niche area of the market isn't covered by Boo brands hopefully "someone" will be there for all those customers.

It may have come across a bit naff, but I think they genuinely believe they can grow so eventually everyone will be looking at one of their portals occasionally.

dtg46

ive clearly said too much.

Ha! You think you've got it tough.

I've been accused of being sartorially challenged.

Boon

8th May '21

"I strongly suspect that the cost of converting these customers to Boo will be substantially higher"

But that's not the Boohoo strategy. They're not shutting down the acquired brands, and trying to migrate the customers over to Boohoo.

They're revitalising and investing in those brands, and pivoting them to be online only. Completely replumbing the back-end, operations, and logistics.

Johnnycomelately

Some great comments on here. I love reading Paul's take on Boohoo as well as all the comments. Thank you for all your contributions.

JohnEustace

Paul,

Are you really saying that Amazon aren't able to handle lots of SKU's? I rather thought that was their raison d'etre.

They have more than 12 million SKU's of their own, excluding Market Place sellers which take them into the hundreds of millions. Amazon US has 33 million SKU's in the clothing, shoes, and jewellery category.

They have dozens of their own fashion brands already - I count more than 50 different clothing brands among their 80 private labels- see this list

Then there's their patent for on-demand apparel manufacturing.

Frank123

just after viewing the results presentation , all looks good until I see the Mahmud Kamani ficking through his phone while his management is rolling out the results .... it doesn't look good .... was he checking the share price ? ...

mind you I can't knock him for the success of boohoo . His certainly has the nack of picking a good management team .

they also mention that the next warehouse will be in the US and more news on that will come later . The US sales could easy exceed the UK figures in short few years in my opinion

And in fact, by Friday the shorts had gone below the 0.5% declarable. So they clearly saw the results as being decent relative to share price, and decreased their shorts (whether they completely closed them, we will not know).

"how they will shift age demographic, the Debenhams customer is definitely a bit older than Boohoo's traditional profile"

But the stated ambition is never to merge Debenhams and Boohoo (Debenhoo? Boohams?) into one platform, one brand.

The ambition is to build a "conglomerate" of brands. Like FMCGs do with multiple brands, different demographics, customer segments, etc.

The last sentence nails it on the head for me.

Adding 25% growth in a year to a £1bn+ revenue business, after a year of 40%+ growth, would already be an ambitious task for any company.

Yet alone trying to onboard and integrate Debenhams and the Arcadia brands bought.

Along with a year of transforming the supply chain.

For me, either the revenue growth target will be missed this year. Or it will be met, but margins will suffer due to lower costs / extra promos to drive that top-line.

Either way, a miss of revenues or margins this year will probably lead to a re-rating downwards to 20x PE for FY21. In a downside scenario, I assume a 10% miss to the 10.7p EPS (so 9.6p), and the market ascribing a 20x valuation in panic, so my downside scenario share price of 192p. A 40% loss from the current price.

Yes, that 25% ambition was set pre-COVID.

And as we know, almost every online company has outperformed.

Breakconvention

13th May '21

This comment has been moderated

HHR

14th May '21

I am in exactly the same position as you.

Last year when Liberty filed a petition against a palm oil company it took 5 months for the investigation to happen, after which the import ban was imposed.

However the fact that the issue wasn't mentioned at all on the boo analyst call makes me think maybe Martin is right and it's just gone away.

The closest boo got to mentioning it in the finals was to say 'The group has been working .... with the .... GLAA, who, ...., confirmed ..... no evidence to support claims of modern-day slavery in the boohoo supply chain.' Maybe that's enough to forestall any CBP investigation?

Personally I'm going to try to wait that full 5 months before buying back in.

Just to be clear, although I see myself as an ethical investor, I have never had any doubts about Boohoo's credentials in this area. Even before the Sunday Times investigation you could see from boo's Glassdoor reviews that they are a relatively good employer.

I'm just worried about the political risk.

Albertos

18th May '21

https://homeofdirectcommerce.com/boohoo-launches-new-dorothy-perkins-wallis-and-burton-websites/

Sounds good.... but I'm not a computer guy.

slord54

19th May '21

Hello all,

Holders of Boohoo may be interested in this write up of a potential competitor, Shein.

https://www.notboring.co/p/she...

Sounds like a similar model to Boohoo and potentially capturing some of the US market?

Harry Hindsight

2nd Jun '21

Just saved £20 using Amazon over the brands own website for a martial arts kimono. Not high fashion but for everything else maybe. And due this week not sometime in the distant future.

Boohoo Results, 12 months to 28 Feb 2021 - new thread, 5 May 2021

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Paul Scott

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