BooHoo trading update - Q1

Wednesday, Jun 07 2017 by
12

Highlights for the three months ended 31 May 2017 Group
· Revenue £120.1 million, up 106% (2016: £58.2 million)
· Like-for-like(1) revenue growth of 78%
· Gross margin 54.2 % (2016: 56%)

Outlook statement sounds very positive,

As a result of very strong trading momentum in Q1, we now expect Group revenue growth for the full year to February 2018 to be around 60%(5), ahead of previous guidance of revenue growth approaching 50%. We expect Group EBITDA margins to be in line with previous guidance at around 10%."

[(5) Revenue growth from the boohoo brand is expected to be 25% to 30% year on year. Revenue growth from the PrettyLittleThing brand is expected to be approximately 75% above the 12 month revenue to 28 February 2017 of £55 million. The balance of the growth to around 60% will come from the Nasty Gal brand.]

Also statement on warehousing increases funded by a share offering (c.5% of co.)

"Plans to construct a new automated super-site of over 600,000 square feet, which will provide boohoo with over £2 billion of net sales capacity."

This will provide total net sales capacity of £3 billion on completion. Quite a bullish statement by management IMO in increasing warehouse capacity to this extent - the expectation of requiring space to sell 10X the amount sold in FY17, which would take 5 years to reach at current growth rates.

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Boohoo Group PLC, formerly boohoo.com plc, is an online fashion retail group. The Company is based in the United Kingdom and has a strong presence in the United Kingdom, the United States, Europe and Australia, selling products to almost every country in the world. The Company owns the boohoo, boohooMAN, PrettyLittleThing and Nasty Gal brands. These brands design, source, market and sell clothing, shoes, accessories and beauty products targeted at 16-30 year old consumers in the United Kingdom and internationally. more »

LSE Price
220.9p
Change
0.4%
Mkt Cap (£m)
2,569
P/E (fwd)
41.8
Yield (fwd)
n/a



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32 Posts on this Thread show/hide all

purpleski 8th Jun '17 13 of 32
3

In reply to post #192649

As I just tweeted about Fevertree Drinks (LON:FEVR) it will only be a short term fall this Boohoo.Com (LON:BOO) is still a great company and if it did pull back 15/20% i would have to top up.

Personally to nail my Brexit colours to the mast I would happily see May get a good kicking and a fall in Boohoo.Com (LON:BOO). And at the moment I have my wife's recently liberated pension 100% in cash to deploy.

Interesting and exciting times.

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ls2g08 8th Jun '17 14 of 32

In reply to post #192654

Wow I commend both of you of holding your nerve up to this point. I have always been a bit on edge due to the high valuation, BooHoo is only 2% of my portfolio! I have held from around 40-50p but top sliced after brexit.

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purpleski 9th Jun '17 15 of 32

In reply to post #192669

Thanks. Yes valuation is very very high but it won't take much to get events up to the price but I think there is precendent for companies like Boohoo.Com (LON:BOO) maintaining high valuations.

Boohoo.Com (LON:BOO) 's announcement that they are building wharehousing for sales of £2bill indicates that they have a plan. I am sure when they expect to hit £2bill but assuming that they do I think the share price will move accordingly.

Additionally Boohoo.Com (LON:BOO) would have to drop significantly for it not to have been an excellent investment and for me to have been better off putting my money in another stock.

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jjis 9th Jun '17 16 of 32
2

In reply to post #192644

That's fine as long as you would be comfortable with running the risk of one day perhaps losing 11% of the total value of your portfolio if something did go wrong.

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Carey Blunt 9th Jun '17 17 of 32
2

I promised myself that I would sell Boohoo.Com (LON:BOO) if the valuation started to look like the valuation of ASOS (LON:ASC) before its spectacular drop in early 2014 . If you look at the historic stock report for ASOS (LON:ASC) on 2nd March 2014 you will see V :2 , Q :97 , M :69 with a PE of 91.4 and a PEG of 3.57.

Comparing that with Boohoo.Com (LON:BOO) today you will see V: 4 , Q : 89 , M : 99 with a PE of 90.9 and a PEG of 4.62. Its strikingly close.

I've been a big advocate (like Purpleski above) of not top slicing and have been adding to my holding all the way up. I just didn't see a better place to put my money. It is now 43.5% of the ISA in which I hold it in (although I have other investments so it isn't such a large part of my overall portfolio).

Today is the first time I have seriously considered selling because its the first time it has met my matching ASOS (LON:ASC) criteria. The problem being that the trading update looked so good.
I'm going to have to have a serious word with myself over the weekend about if I break my own rules and keep going with Boohoo.Com (LON:BOO) and if so, for how long. What would my next consideration point be?

Anyone else considered Boohoo.Com (LON:BOO) against ASOS (LON:ASC) and think its worth drawing a parallel?

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purpleski 9th Jun '17 18 of 32
2

In reply to post #192704

Hi jjis

I am not sure I would use the word comfortable :-) but am aware of the possibility though of course I think it unlikely or otherwise I would not be holding 22% of my portfolio in Boohoo.Com (LON:BOO).

Additionally to lose 50% of the value I would have to sell the stock, which I would not any more than I believe Kamani or Kane would if the price dropped significantly.

I also remember some of the lessons of history. Just two examples: the price of Coke halved within about 18 months of its IPO in 1919. It is now a 9,000+ bagger and that assumes you did not reinvest divis.

Then look at the chart of £ASOS the stock dropped from 7000 to about 2000 between in 2014 and is now back at 6300.

We will see but at the moment the management have not done anything to give me cause for concern or indeed to indicate that they can not take sales to £2bil.

Have a good weekend.

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purpleski 10th Jun '17 19 of 32
3

In reply to post #193049

Hi Carey

Good to hear I am not alone. I actually don't separate my portfolios (SIPP [I'm 55], ISA and non-ISA holdings) as I only have one objective (increasing capital value over the long term through total return). To use @jjis’s words though I would not be comfortable if Boohoo.Com (LON:BOO) was 43% of my portfolio unless I was running the company!

I am not sure whether comparisons with ASOS (LON:ASC) are valid, I have not had time to look. But my first thoughts are that there are so many variables that just looking a couple of metrics is not sufficient and these are largely backward looking.

I look at the profitability figures (OM ROA ROCE & ROE), sales and profits in terms of where they are now and and what the company is targeting in the future. I also look at SR's and the new Stockopedia styles/risk ratings. Currently sales are £300m and net profit £25m (ye 2017) but:

  • They have announced that they are building out wharehousing to accommodate sales of £2bil
  • The purchase of Nasty Girl indicates plans to build sales in the US
  • The decline of the "high street" in the UK/Europe can only be seen as a positive for online retailers and it cannot be long before the likes of Zara (£500/£600 mil UK sales) start to worry about the likes of Boohoo.Com (LON:BOO)

I think Boohoo.Com (LON:BOO) has legs and so I am comfortable(!) at these levels but also just do not believe that I can time the market.  I would hate to get out now and then not have the "balls" to buy back in when the price dropped (or didn't and I realised I had made a mistake) only find that the stock 20 bagged (740p in my case) in 8 years time (10 year holding period for me). And anyway where would I put my money?  :-)


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ls2g08 10th Jun '17 20 of 32

In reply to post #193089

I read the RNS statement as saying that the warehousing space would be a total of £3Bn, £1bn current (once expansion has finished) + £2Bn new. Have I misunderstood this?

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purpleski 10th Jun '17 21 of 32

In reply to post #193094

Hi Is2g08

My apologies. Sloppy reading by me. Yes £3bn in total.

"The growth rates of the Group's brands are accelerating the need for more warehouse capacity. Consequently, the Group announces today plans to construct a new automated super-site of over 600,000 square feet, which will provide boohoo with over £2 billion of net sales capacity, in addition to the £1 billion net sales being provided by the extended Burnley site."

Thank you.

Michael

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hayashi22 10th Jun '17 22 of 32

Re Boo and ASOS. You might want to think about where BOO is now and look at the ASOS valuation in comparison over a similar timeframe. BOO will not continue to grow at this rate but it might for a while longer.
Extending the franchise, or the three franchises, to new territories provides tremendous growth potential but requires perfect execution.
And there is the Black Swan events/scenarios. Maybe Kamani/Kane decide to sell out.
I'm certainly happy to run with this ball for a while longer.
The capital spend programme is really a very convincing pointer to future growth.

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Trigger14 10th Jun '17 23 of 32
2

It's hard to value a business that is growing so quickly, but it is possible to do some sensitivity analysis around what sort of growth rates might be implied by the current valuation. This is fairly inaccurate and very sensitive to assumptions you put in, but playing around with some of the valuation tools in stockopedia (I like the Graham rule of thumb because it is the most simplified DCF type one) suggests that the current share price is implying medium term (over next 5 years or so) growth rates of around 50%

It is getting close to what I would describe as priced to perfection. It could of course continue to beat these high expectations but it only takes growth expectations to fall a bit and it will appear wildly expensive and crash like ASOS did previously.

I have much respect for those that have restrained themselves from topslicing so far and wish I had been less cautious myself (I've topsliced several times and kept to around 10-15% of portfolio) but I think it is now a little risky to have this as too high a proportion of your portfolio.

Blog: Quality Share Surfer
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whitmad 10th Jun '17 24 of 32

In reply to post #193049

I have followed almost exactly the same thought process, having bought BOO at an average price of 22.9p in 2015, I'm now sitting on a greater than 10x return, and BOO is around 20% of my portfolio. Having sold ASC at close to their peak (more by luck than judgement), I am well aware of the parallel. The difference I think is that, since that dramatic fall following BOO's first update after IPO, they have consistently beaten forecasts by a considerable margin. You might therefore argue that the current 90+ P/E is at the pessimistic end of future performance estimates. Yes, there is a real risk of a substantial drop if growth slows, however I am prepared to accept that risk given the potential rewards if they continue to deliver as they have previously.

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GBGMC0 11th Jun '17 25 of 32

In the long term what is the long term competitive advantage here with BooHoo. It has executed itself fantastically well but I don't see how it will protect that advantage over the longer term.

What will stop other retailers , even the likes of Next , competing against BooHoo online and slowing it's growth.

BooHoo also used to be a Highstreet retailer after all

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vik2001 11th Jun '17 26 of 32
1

In reply to post #193204

Boohoo is for a younger audience who are into fashion and keep up with it - so hence they will continue to keep up to date with fashion and spend their money on it.
Next is for a older audience, ie the trendier youngsters (who are the ones spending money on clothes) wont be shopping at Next - so the competition between the two is at different ends.

Boohoo is kind of like JD Sports for me. They have attracted a large younger audience who are willing to spend on fashion to look cool. I think like JD Sports has done Boohoo will continue rising and performing exceptionally well for sometime to come.

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purpleski 12th Jun '17 27 of 32

That well that is quite a chunky fall this morning but a. As Boohoo.Com (LON:BOO) up 73% in 3 months and 350% in 12 and b stocks can not go in a straight line but I am glad I did not buy/top up on Friday!!

Happy holder.

Michael

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ls2g08 12th Jun '17 28 of 32

In reply to post #193449

Yes it puts those theories into position management in to practice!

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purpleski 12th Jun '17 29 of 32

In reply to post #193459

Hi is2g08

Em. To clever for me! :-). What do you mean?

KR

Michael.

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Laughton 4th Jul '17 30 of 32
3

Not really sure where it's best to post any new info on Boohoo.Com (LON:BOO), or even if that is something that is supposed to be done on Stockopedia, but came across this - PLT crowned fastest growing online fashion retailer:-

https://www.retailgazette.co.uk/blog/2017/06/prettylittlething-crowned-fastest-growing-online-fashion-retailer/

If posts such as this are not "the done thing" then let me know and I'll stop.

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Laughton 9th Aug '17 31 of 32

Noticed that Redburn came out with some research yesterday and a SELL rating on Boohoo.Com (LON:BOO). Anyone have access to it?

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Housemartin2 9th Aug '17 32 of 32

BOO share movement probably not helped by words from chief exec of New Look that standards in 'vast majority' UK clothing factories are worse than China & Bangladesh. BOO known to source a lot from UK.

Probably a coincidence that New Look has posted very poor results and has moved significant amounts of sourcing from UK in last 3 years and as a consequence has been hit with US$ / £ exchange rate losses.

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