Small Cap Value Report (26 April 2017) - BOO
Good morning!
Coverage might be a little bit limited today but we'll see how it goes.
First up, I will mention the boohoo results:
Boohoo.Com (LON:BOO)
Share price: 184p (-3%)
No. shares: 1123.3m
Market cap: £2,067m
Gross profits are up 42%, growing at a lower rate than the 51% revenue increase:
- Revenue £294.6 million (2016: £195.4 million)
- Gross margin 54.6% (2016: 57.8%)
Profit before tax increases to £30.9 million (from £15.7 million).
The contribution from PrettyLittleThing begins from the start of January (until the February year-end).
Outlook:
The outlook comments remain positive:
Trading in the first few weeks of the 2018 financial year has made a promising start and we are excited about the prospects of our development into a multi-branded business. We expect group revenue growth approaching 50%(1) over 2017, which includes growth from the recent acquisitions, and a group EBITDA margin of approximately 10%."
The main boohoo brand is expected to grow revenue at a rate of 25%, with the rest of the growth coming from the acquisitions of PrettyLittleThing (which is expected to have an organic growth rate of 35%) and Nasty Gal.
So the expected organic growth rate across the group sounds a lot closer to 25% than the 50% total sales growth anticipated.
(work-in-progress)
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82 comments
Really no need to worry.
I doubt Boohoo's management think they can compete head to head against Amazon.
Which would explain why they already use Amazon as a platform in both the UK & US.
It would also explain why they have no current plans to build any US logistics infrastructure.
Re. Boohoo.Com (LON:BOO) US expansion. I read yesterday in the Sunday Times that Amazon in the US is now no. 2 in fashion retail.
If BOO is planning on competing against Amazon in the US, then on current performance they got less than zero chance. And even if they achieve an average level of customer service, then that will still not be good enough. Amazon's customer service and platform are just streets ahead of any competitor.
No long or short position, but if I had a long position, I would be worried.
A decent delivery platform and overall good customer service is a "necessary" but not "sufficient" requirement for success in any market, especially the ultra competitive US.
However, for the teen fashion conscious there's more to it than simply getting the product to the customer promptly. With two teenage daughters, the provenance of the swish new party frock is quite important. "I bought it on Amazon" doesn't quite have the same cachet as "it's the same limited run designer frock as worn by [insert B-list latest cult underground celebrity] on their latest YouTube vid from that boutique Boo". If BOO can piggy back Amazon's logistics there's mileage in it for both of them to cooperate IMO.
Gus.
Thanks gus. I have only a passing interest in this stock, so will let others argue the toss.
To be honest the Trustpilot ratings of Boohoo.Com (LON:BOO) are not much better. They have 118k reviews with an average of 6.1 out of 10:
https://uk.trustpilot.com/review/www.boohoo.com
This is over a period of time when Boohoo.Com (LON:BOO) have been astonishingly successful with supernormal revenue growth. In short, I wouldn't be too concerned about customers sounding off on a review website.
But ASOS (LON:ASC) only get 3.3 from over 2,600 reviews on Trustpilot.
I guess if its cheap enough people are willing to deal with poor service? However I think when looking at reviews it is key to look at relative scores compared to other retailers opposed to absolute scores. I think Boohoo's 6.6 trust pilot review is not too bad. I.e. compared to ASOS.
It's about reputation, if they acquire a bad reputation in the US it could well affect their business there, I think a lot of people look at reviews when considering buying from a new company. Bad reps are hard to shake off.
RE. Boohoo.Com (LON:BOO) If I saw this kind of rating and feedback for any company on Amazon, not only would I stay away but I would warn family and friends.
Sitejabber are showing a total of 425 reviews dating back to March 2013, of which 287 are rated one or two stars.
As far as I can tell Boohoo don't disclose the number of orders by territory, but from the total orders and the revenue splits by territory I reckon there have been something like 2.5 million orders from the USA since March 2013.
That's a very rough estimate but even if I'm out by a factor of ten, 287 bad reviews in the context of the number of orders fulfilled actually seems pretty decent to me.
Presumably they had the option of buying the Nasty Gal warehousing and logistics facilities on the cheap as part of the bankruptcy proceedings. Time will tell if they made a wise decision in that regard.
According to the lastest RNS, Boohoo has 5.2m active customers delivering 11m orders. I hardly think a few disgruntled US customers are going to bring the company to its knees. Nevertheless, customer satisfaction is a very important metric and the company should look to resolve any logistical problems it currently faces with the US.
That's the thing, the company doesn't need to be brought to it's knees for the stock to drop significantly. Only a change in perception that future growth may not be as good as expected.
- or putting my previous comment into English
As someone with no industry specific knowledge, it just seems counter intuitive to source fast fashion from across an Ocean to any significant extent.
Perhaps BooHoo should have bought Nasty Gals warehouse & distribution network as well ??
As someone with no industry specific knowledge, it just seems counter intuitive to source fast fashion from across and Ocean to ant significant effect.
I'm glad they didn't acquire the warehouses etc The beauty of the transaction is found in boohoo's ability to put a discrete facade on one of the quickest test and repeat models around. They also have greatly enhanced the permeability of their email advertising for all brands by acquiring Nasty Gal's heavily US saturated database.
I see very little risk in this acquisition and hope that similar opportunities arise in the future, I can't envision a better way for them to crack male fashion for example.
Yeh, well my suggestion about acquiring the warehouse & logistics of Nasty Gal was a rather throw away line - given what I have read about NG, I doubt it was anything but a shambles - but my main point was how you deliver on the 'fast' bit of fast fashion when sourcing from a warehouse across the Atlantic.
I know nothing about international logistics but it does seem to me that its like doubling the width of the US. Perhaps I am in danger of thinking in terms of a small island where next day delivery is not unusual. Perhaps the expectations in the US are, given the geography, different.
Would be interested in views on this
I assume that management have thought this through & come up with the best solution.
Boohoo is not short of cash & therefore if having a warehouse in the US was the best solution then thats what they would have done.
Until management make a mistake, I think we should trust their decisions.
Reasonable point Steve but my background concern is that the US has been the graveyard of UK retailers - albeit in different formats to BooHoo - by misunderstanding the environment. I am not aware that BooHoo have any knowledge in depth of the US market
A retort may be that they have done pretty well there so far, so they must be getting something right. Lets see as they scale up.
I don't want to overemphasise this. I think this is a star of a company run by pretty cute individuals but I would like some comfort on this point.(My concerns are personally ameliorated by BooHoo being a 5+ bagger for me so I have a fair value hinterland to cover any dips)
Completely agree, it's nice to be holding a company where we are concerned about possible, future, maybe, potential problems, rather than one like RBG that has actual problems now - much prefer the virtual type ; )
Steve - oh yes. I was in RBG until mid March, when my concerns about whether rolling out posh bars was a wise place to be given the coming squeeze on consumer spending (consumers still going out but trading down etc). (Like to flatter myself but really more luck - for once )
BOO is a whole different ball game
I did a little bit of research earlier and found the following estimated delivery times in the US:
Boohoo – 6 days (standard) 8-10 days Supersaver
Charlotterusse – 5-10
Forever21 – 3-5 days standard
H&M – 3-5 days
Lulus – 7-10 + 2-3 dispatch
It is worth noting that there are next day delivery option also but they cost a fair bit more.
My take from this was that customers do in fact have a lower expectation of delivery times as you speculate but I do know amazon amongst others are at the very cutting edge of minimising delivery times so expectations will most certainly change.
It’s far from clear cut but I think that management have made the right decision keeping everything under their noses as they expand into the US but like you I can see a real need for significant warehouse expansion both locally and abroad in the near future.
Jamaker - thanks for this. V interesting.
"Americans are very demanding and many are abusive, you only have to look at some american sites or read reviews. A lot of the negative reviews seem to be about delivery times. Sizing is always going to be an issue, not sure if that's because of differences between UK and USA or not but a UK size 8 is not the same as a USA size 8."
Isn't that the point, though, that these obvious issues need to be sorted if Boohoo.Com (LON:BOO) are aiming to service the US market successfully from UK?
Yes I agree Boohoo.Com (LON:BOO) should be sorting out any issues. I'm just saying that americans maybe different from other countries, they do have a certain reputation abroad. Yes running it from a UK base maybe not the best policy.
Americans are very demanding and many are abusive, you only have to look at some american sites or read reviews. A lot of the negative reviews seem to be about delivery times. Sizing is always going to be an issue, not sure if that's because of differences between UK and USA or not but a UK size 8 is not the same as a USA size 8.
H&M one of the leading sites in the US for women's fashion according to Alexa (admittedly I think it is a higher price point and obviously a more mature brand); have received 449 reviews with 49% being five star and 25% being one star. This compares to BooHoo's 425 reviews with 15% being five star and 64% being one star.
Comparing this to the reviews in the UK market which BooHoo have been successful in, the reviews on UK trust pilot has 59% of reviews being 5 star and 9.4% being 1 star. As others have said I wonder if this has possible negative connotations for the US expansion as clearly something is not working.
Had a quick look at the 1 stars and most are to do with no or late delivery, so I think they need to sort that out. Promising 3 or 4 day deliveries is not working in the states.
Agreed. It also seems they are compounding it with little to no communication to the customer when problems occur.
Netflix are running a drama on Sophia Amaruso, the founder of Nasty Gal, called "Girl Boss". There is an excellent review in the Telegraph ( just search the Telegraph site for "Nasty Gal" and it is free for viewing)
Essentially, Amaruso seems to have been more interested in being a feted celebrity rather than a successful businesswoman
Some key points
1 Sales reached $75 million in 2015/2016 when they were supposed to be $300 million
2. Significant employee issues which had resulted in several law suits against the company, and key employees quitting.
3, Growing and tangible customer disaffection
4 Total loss of cost control, poor delivery standards to key retail outlets
5 Liquidity pressure and inability to service debt
Yet the brand was high profile, quirky and in demand
I do think that current stats re service touch more on Nasty Gal than on Boohoo but no doubt what happens over the next 6 months will be defining.
My own view is that Nasty Gal sales could hit $100 million in 2017/2018 with a possible beat on the upside, but the unknown variable is the logistics behind the brand .
Agree johnmc52 ... I think the Netflix series will be some useful free advertising for the brand too. Another key point to consider is part of boohoos strategy is multi brand at global scale ... Nasty gal website already on offer in AU, UK and Euro countries, I can see it already generating content and noise on social media in those markets and CEO on recent investor presentation was very excited at global growth opp for that customer segment.
I think you're going to be disappointed with your Nasty Gal expectations for 2017/18.
In the acquisition RNS they said "Nasty Gal delivered net revenue of US$77.1 million in the year ended 1 February 2016. This includes revenue from vintage clothing and third party brands, which are excluded from the proposed transaction".
So you can't just take the $77m and add a bit for growth. The $300m figure was just a journalists's wildly inaccurate guess and should be ignored.
In their presentation last week, the company mentioned expectations of £15-20m for Nasty Gal for this year and revenue growth for the group as a whole of 50%. There may well be some outperformance against that baseline but to expect $100m for Nasty Gal alone is... optimistic.
Boohoo.Com (LON:BOO) might have quite a lot of work to do to get up to speed on their US operation, at least if these reviews are representative:
https://www.sitejabber.com/reviews/www.boohoo.com
Hi Jane - thanks for this link. This really paints a dismal picture of the customer (lack of) service from Boohoo.
More than 50% of the reviewers gave only a one star and many of the comments border on open abuse.
For comparison I entered Asos in the search box and frankly they don't fare any better. They too have over 50% giving the company only a one star.
Logically, whatever the CEO might think or want one to believe, there is no way that mailing parcels from the UK could be as efficient as having a US based operation, especially when things go wrong and need to be returned. Looking at these reviews, I am not at all convinced on the US growth story going to plan, at least not without significant investment in warehousing, etc. Americans are pretty unforgiving when it comes to poor customer service and their target demographic is super active on social media. Get a bad name, and it really will be BOOHOO....
I held until yesterday, banked tidy profit, no plans to jump back in.
" I am not at all convinced on the US growth story going to plan, at least not without significant investment in warehousing," Hmmm.. maybe someone should put them in touch with Somero Enterprises Inc (LON:SOM).
Hmmm - no better if you look on this site for reviews of Nasty Gal. Lots of them relate to problems pre BooHoo taking over but not all.
I must admit I'm still looking for the conclusion of Paul's report on BOO, I certainly would'nt be rude about it, I'm one of Pauls fans...With Pauls aid I made a couple of bob out of BOO but am now out of the stock & seriously looking to get back in. I know, DYOR, I'm afraid I'm old & thick & I like to read his "OPINION"
PS, tell Paul, there is only two things that give you a bad back, one is gardening.
The other is eating chapati up a mountain, lol, must have been gardening.
Jax ^ im the sane one, rest of the world is crazy..
They post to America within 6 days standard according to their website (H&M for example deliver within 3-5 business days with a further two day allowance for rural areas) I think that is remarkably quick from here but can only assume their other local competitors markedly outstrip that time, this given their price point might not be a major issue but they certainly will miss out on the Friday buyers who decide to go out on Saturday night but realise ‘oh my god I’ve got nothing to wear’ (despite a wardrobe full of boohoo, misguided etc).
I’d love speak to some American customers and see if boohoo has developed any of the allure Topshop had/ has over there (but as a lot are teenage girls I’d probably get arrested). I remember Americans/ Canadians/ Australians raving about it and ‘British shopping’ in general before internet shopping became as prevalent as it is now.
I agree the valuation is high but I agree with the abounding sentiment that this is a disrupter that is still disrupting. Online sales are still a relatively small part of total retail spend and is certainly a subset of the industry that has many years of growth ahead of it. Boohoo is ideally placed within it and offers a clear pressure point of young women (bolting on kids and men) with their chosen medium of social media suiting the business model perfectly.
Anyway, I'm dosed up with Ibruprofen, and have covered 7 companies (CRAW, PHD, WAND, REDS, HMLH, R4E, DSG) in a separate report here:
http://www.stockopedia.com/content/small-cap-value...
Can I just point out that the SCVRs are a free service, and are not part of the Stockopedia subscription.
Graham & I do what we can, but both have very busy schedules. So some days we have plenty of time to write, other days we don't. With 2 of us now, there will always be something every day.
Also, we're not machines. I make my living from the markets, not from writing these reports (although Ed does kindly pay me a modest fee). It's very difficult to concentrate during market hours, which is why sometimes I need to park it to one side, and finish off in the evenings.
I appreciate this may not be entirely satisfactory for readers, but that's the way it is. I'm not a hack churning out copy. I'm a real world professional investor, and do my best to write up interesting stuff for people here, as best I can.
Graham & I are trying to get a bit more organised, so things should improve. It's mainly my fault, as I'm just an erratic person. That's why I'm unemployable & have therefore worked for myself since 2002. lol!
Regards, Paul.
P.S. To see what SCVRs have been written, the easiest place to go is our landing page here (I suggest bookmarking it):
http://www.stockopedia.com/columns/paul-scotts-uk-...
If you scroll down on that page, you will find all the recent reports listed. So it's quick & easy to check if there is one, or two reports each day. Most days it's just one report.
P.P.S. Jax - I think your writing style is rubbing people up the wrong way. Perhaps you could tone it down a notch? That might help.
Perhaps Jax would prefer to give his own pearls of wisdom. Everyone else can appreciate the work and valuable insights Paul conveys. If this doesn't suit then by all means find another vehicle as I really can do without the moaning polluting this site.
That's the key question-is it worth buying now? Impossible to answer really and may depend on your investment time horizon.
I invested @ 0.24 after the profit warning. I topsliced @ 1.40 and now everything left on the table is pure profit. Clearly this is now turning into a mature business so those seeking rapid growth may be wiser to look elsewhere. However- as an investor who generally looks for 20% gains this has upset my thoughts.
It shows that hard and fast rules may work in the short term but you may be undone by the unrealized profits that you choose to lose by applying these metrics without thinking further.
That said - this is clearly still a growing business. Reading in the update today the business is starting to roll out mens, maternity and kids clothes - my missus commented that at this price point it is a no brainer 'online primark' were her words. Then you have the expansion overseas. On balance actually I think this should be a core holding for me over the next 2-3 years at least rather than exit one a quick profit.
I'm more comfortable with this holding that other racey shares (purplebricks/bioventix/g4m).
Thanks Viz.Appreciate your considered response. I did a little top slicing at 120p which I now regret but have now decided these BOO shares are a core holding and I'm in for the ride. More likely to add now though that would probably need a retrace. As an aside I think you need to put aside PER valuations and look at some other matrixes on how to value this share.
I so regret not investing in Boo when they fell to around the 0.30 mark. One of those kicking yourself experiences, followed by watching the share price continue to increase, doing nothing then feeling that the boat has been missed!
And it's still going up! Is it too late now?!
You have to take the convertible loans for the dilution risk they are - i.e. eps versus fully diluted eps. Personally, I reduced my Petards (LON:PEG) holding by 2/5 when they announced full year results in March. At the time, I was disappointed they hadn't introduced a dividend and therefore, derisked my position. The shares are also pretty illiquid, so if you are ever trying to get out on a bad news day, the price fall could be steep. On the plus side, the business opportunity, recent performance and QM metrics are all very strong. I am hopeful that the shares will begin to leave their microcap label behind and develop as a solid smallcap performer.
Re. Boohoo.Com (LON:BOO) On the subject of operational gearing this is what I posted in a different BB this morning.
"
XXX - the definition of operational gearing is
" Operational gearing is the effect of fixed costs on the relationship between sales and operating profits. If a company has no operational gearing, then operating profit would rise at the same rate as sales growth. " (Investopedia)
This is the recognised definition. So from today's accounts, sales growth 51%, operating profit growth = 101% . Operational gearing is therefore 101/51 = 198%.
Which means that every 1% growth in sales is adding roughly 2% to the bottom line.
Looking at the previous 2016 results, sales grew by 42%, but operating profit grew by only 40%. So that gives an operational gearing of 95%.
This makes today's results in this respect the more remarkable.
"
I have no position long or short.
Hi Paul do you still intend commenting on REDS which reported Final results yesterday, though in fairness they mirrored the Trading update of 7th March which you did comment on, so not sure if there are any new insights/observations to add!
Hi Cojode,
Yes, I'll be looking at REDS today.
I've got the rest of the afternoon free, so will spend the next 5-6 hours on covering the companies mentioned in post 5 above, in a separate report.
Cheers, Paul.
Many thanks, Paul. Hope the back improves!
Thanks Paul
Hope the back feels better soon
Hi,
Just to let you know that I'll be writing a separate report today, hoping to cover: CRAW, PHD, WAND, REDS, and possibly some of these: HMLH, DSG, WGB
I'm laid up with pulled back muscles at the moment, so am finding it more difficult than usual to get moving in the mornings. Hence Graham wasn't sure if I was going to be working today or not.
Regards, Paul.
Hi Paul
Very much looking forward to your thoughts on PHD. The interims highlight the revenue and order growth but beneath the bonnet:
* staff costs are up by 36%, probably not just the new acquisition as this took place towards the end of the period
* other operating expenses are up 164%. I couldn't find an explanation of what these are or why they are so high. Would this one off acquisition costs?
* as a result of the above and the increase in the number of shares (to fund the acquisition) there is no growth in basic or diluted EPS.
If the other operating expenses are a one off then this looks good. If they are an increase in the cost base then not so.
Thanks as always
Petards (LON:PEG) has issued an AGM statement RNS today (not yet on the Stockopedia website) that says:
At the AGM, Petards Chairman, Raschid Abdullah will make the following statement:
"I am pleased to advise you that since my Chairman's statement in the Report and Accounts, we have been successful in securing a GBP4.3 million order from Stadler Bussnang AG for the provision of Petards eyeTrain CCTV and Automatic Selective Door Opening Systems ('ASDO'). Stadler is a quality Swiss based global train builder and a new customer. This represents an excellent opportunity for Petards to develop internationally.
"Investment in UK rolling stock is at record levels giving rise to significant opportunities for Petards. I am pleased to report we are presently in active negotiations with existing customers over new contracts.
"Whilst our defence business has been slow on order intake during the first quarter, indications are that there is further MOD, NATO and third party business in the pipeline. The renewal last December of the three year MOD Systems Adaptive Counter Measures Dispensing Systems Contract is anticipated to bring additional business throughout its duration.
"The QRO acquisition, completed April 2016, together with its management team has integrated well into the Group. Petards Provida range of products in the Emergency Services division and QRO are both seeing increased enquiries from many police forces throughout the UK at the start of their financial year.
"We entered 2017 with an order book of GBP20 million. At the 31 March this year, it stood at GBP21 million of which GBP13 million is scheduled for delivery by the end of the year.
"The strength of the order book gives the Board confidence of a good outcome for the year and I look forward to reporting further progress in the interim results in September."
FREng - £13m new revenue in-year looks good for a company with a £11.6m market cap!
Yes, and Petards (LON:PEG) has the maximum Piotroski score - it's profitable, cash generating, and improving margins. SR of 97. It looks like a successful niche tech company with IPR that attracts business from large customers (which I know from experience takes a long time to establish and can provide good reference sales) I'm long, so I'd like to hear the bear arguments!
Petards (LON:PEG) does look very attractive and is clearly successful in a niche market, but what has always stopped me from pulling the trigger is the £1.5 million in convertible loans outstanding. I've had bad experiences with such loans, so am naturally weary of them. I am probably mistaken (having watched it rise from 22p), or placing too much attention to this, but that is my bear argument. I'd be interested to hear the thoughts of others.
Hi Graham,
I would appreciate your views on the PHD interims if possible.
BW
Hederz
The Boohoo.Com (LON:BOO) results are slightly above market expectations, with exceptional revenue growth and very healthy profit margins. This is clearly a business which is winning, but on an eye-watering valuation.
I believe that their forward guidance will be proved to be too conservative. They are still operating under the shadow of the profit warning which slashed the share price in Jan 2015. Last year they guided 25% revenue growth for the core boohoo business and "similar margins" which were about 10% at the time. Over the last year the guidance has been increased around half a dozen times and they delivered 45% revenue growth and over 12% EBITDA margin.
Now they've reset back to the 25%/10% guidance, similar to what they gave at the beginning of last year. So I believe there should be scope for further upgrades to revenue growth and margin guidance over the course of this year.
The Boohoo.Com (LON:BOO) revenue growth story continues to be very impressive.
What concerns me is the absence of any operational gearing in the business. Despite today's guidance of a 50% gain in sales for the current year, EBITDA margins are forecast to fall to 10%.
The reasons of course are the necessary business investments: warehousing, re-platforming websites & marketing.
Yet currently there are no plans to make investments in US warehousing - orders will be fulfilled from the UK. Given that in this industry 50% of orders are returned, it's not obvious how the US is going to be profitable.
The point I was trying to make is that I think they are being too conservative and I don't expect EBITDA margins to fall unless gross margin falls again and/or there is a considerable uptick in marketing expenses, which there may be as they promote their new brands.
Peel Hunt who are usually very on the ball with coverage of Boohoo.Com (LON:BOO) and the sector in general, seem to agree with me and have set their PBT estimate for FY18 about 10% ahead of the company's guidance.
The operational gearing is evident in revenues increasing 51% but EBITDA rising by 90% and profit before tax rising by 97%.
This time last year they guided to expect EBITDA margins for FY17 in the region of 9.6% (same as for FY16). In fact it has turned out to be 12.1%, so it is very possible they may beat the 10% guidance they are now issuing for FY18, just as they have established a habit of beating top line estimates.
It's also worth noting that EBITDA margins for ASOS (LON:ASC) are around 5%.
I listened in on the webcast earlier this morning and one of the analysts raised the same question of fulfilling US orders from the UK. The management response was that delivery services to the US are getting faster and better even compared to competitors based in the US, which seems hard to believe but they seem pretty confident in that claim.
"Yet currently there are no plans to make investments in US warehousing - orders will be fulfilled from the UK. Given that in this industry 50% of orders are returned, it's not obvious how the US is going to be profitable."
Happy with this and the "test and repeat" model (I've worked with a retail chain for the more mature women which operates the same approach successfully) as points towards a low-risk approach to expansion.
Whilst you have a nascent US business, as long as you can deliver the high customer service levels from the UK, far better to fulfil orders from blighty and focus on growing in scale (i.e. proving the model works without large Capex investment).
Forget about profits for now - once the volume starts coming through, you'll have a good business case for investing in US warehousing and getting a great ROCE due to the impact it has on the US bottom line.
Following their previous profit warning and impact on the shares, happy to see a measured approach to expansion!
Re: Boohoo.Com (LON:BOO) , specifically the lower margins and how they say some has gone into marketing, I have actually seen a lot more ads/marketing content from Boohoo and PLT over the last 6 months. It used to be very occasionally that something was around, but recently a lot of buses, bus stops, tube carriages, etc., have all kinds of content floating about. I even had a few friends living abroad (1 from Germany and 1 from Poland) mention that they've started using Boohoo there, which can only be a good thing - word and sales, it seems, are spreading.
Hi Howard,
Re your post no.3 above, just to correct one point. You said;
Given that in this industry 50% of orders are returned, it's not obvious how the US is going to be profitable.
Actually, the industry average is about 30%, which is the same as it used to be in the old days, with mail order.
BooHoo has a returns rate of about 20%, per a chat I had with the CEO, and think I read it somewhere (possibly in SCSW) too.
BOO know what they're doing, so I wouldn't worry about anything longer term. They'll do fine in the US, whether they have their own warehouse, outsource it, or send parcels from the UK - although I don't think the US customers (who expect a high standard of service) would be happy with slow delivery from the UK.
As others have said though, the valuation is now very aggressive.
Regards, Paul.