REG - boohoo group plc - Trading Update

BoohooAnnouncement

16/12/2021 07:00

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RNS Number : 8686V  boohoo group plc  16 December 2021

FOR IMMEDIATE
RELEASE
                16 DECEMBER 2021

 

The information contained within this announcement is deemed by the company to
constitute inside information stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of the domestic law of the United Kingdom
by virtue of the European Union (Withdrawal) Act 2018 (as amended) ("UK
MAR").  Upon the publication of this announcement via the Regulatory
Information Service, this inside information is now considered to be in the
public domain.

 

boohoo group plc - Trading Update

("boohoo" or "the Group")

 

Boohoo today provides an update for the three months to 30 November 2021 ("the
Period").

Boohoo has seen gross demand growth in the Period exceed that achieved in each
of the first and second quarters of the financial year, however expectations
for the financial year ending 28 February 2022 will be lower than previously
guided. This is as a consequence of significantly higher returns rates
impacting net sales growth and costs, with continued disruption to our
international delivery proposition impacting international demand, and
significant ongoing pandemic-related cost inflation.

 

It is the view of the board that the factors currently negatively impacting
the business are primarily related to the ongoing impact of the pandemic and
are, therefore, transient in nature.

 

                        Three months to 30 November         Nine months to 30 November
 £ million              FY22     FY21     1 Year   2 Year   FY22       FY21       1 Year     2 Year

                                          Change   Change                         Change     Change
 Group total net sales  506.2    460.7    10%      53%      1,482.1    1,277.1    16%        65%
 By region
 UK                     320.3    243.6    32%      78%      889.8      673.7      32%        80%
 ROE                    53.9     61.2     -12%     15%      158.8      185.0      -14%       18%
 USA                    104.6    121.3    -14%     36%      355.1      323.5      10%        89%
 ROW                    27.4     34.6     -21%     -4%      78.3       95.0       -17%       -2%

 

Overview

·    Gross sales up 28% in the three-month period, net sales up 10%

·    Exceptional UK demand, validating the strength of our business model
where our leading proposition across price, product and service continues to
resonate strongly with customers across our brand portfolio

o  UK gross sales up 58% vs FY21; 102% vs FY22

o  UK net sales up 32% vs FY21; 78% vs FY20

o  Net sales impacted by returns rates that are 12.5 percentage points higher
than last year, and 7 percentage points higher than pre-pandemic levels driven
by an exceptionally high dress mix

·    International performance across the Group's brands and markets
impacted by significantly longer customer delivery times as a result of the
pandemic, with all of our international sales currently fulfilled from our UK
distribution network

o  Having seen strong signs of a recovery in September, revenue in Europe has
declined in the latter months of the Period with increased consumer
uncertainty

o  Performance in the US has not seen the recovery previously anticipated due
to the continued impact of reduced air freight capacity on delivery times to
customers

·    Significant and ongoing pandemic related inbound freight cost
inflation impacted gross margin in the Period, down 100bps year on year. This
is estimated to impact EBITDA by approximately £20 million in the financial
year, the majority of which is in the second half

·    Strong balance sheet with current liquidity of over £170 million and
net cash of £70 million

·    The Group continues to invest in building a distribution network
capable of supporting in excess of £5 billion of net sales, with our first US
distribution centre expected to go live in 2023, and we are considering
options to expedite this process.

Guidance and Outlook

For the year ending 28 February 2022, the Group now expects net sales growth
to be 12% to 14%, compared to previous guidance of 20% to 25% growth. This
reflects our expectation that the factors impacting our performance in the
Period persist through the remainder of the financial year, and recent
developments surrounding the Omicron variant could pose further demand
uncertainty and elevated returns rates particularly in January and February.

 

Adjusted EBITDA margin for the year is expected to be 6% to 7%, compared to
previous guidance of 9% to 9.5%, implying adjusted EBITDA of between £117
million to £139 million. This is due to significantly higher returns rates
impacting net sales growth and costs, with continued extended delivery times
impacting international demand, consequently driving lower returns on
marketing expenditure, and significant ongoing pandemic-related inbound
freight cost inflation.

 

The Group expects to incur cash exceptional items for the year of around £33
million, compared to £22.5 million previously guided, primarily due to
warehouse and new brand restructuring.

 

The Group remains highly confident about its future growth prospects given the
exceptional growth achieved in the UK where our leading proposition across
price, product and service continues to resonate strongly with customers
across our brand portfolio. The Group continues to make significant investment
into its infrastructure, including progressing plans for its US distribution
centre, to support its future international growth ambitions with a network
capable of delivering in excess of £5 billion of net sales, and returning
towards normalised growth rates of 25% per annum post-pandemic.

 

In addition, the Group's confidence in its medium-term margin guidance for 10%
Adjusted EBITDA margin is unchanged, with financial performance this financial
year containing costs that are pandemic-related which will unwind, as well as
our investment into recently acquired brands and the Debenhams platform that
will leverage as they scale. These costs consist of:

·    inbound freight cost inflation of approximately £20 million;

·    outbound freight cost inflation of approximately £45 million as a
consequence of higher carriage rates compared to pre-pandemic levels; and

·    start-up costs of approximately £10 million into the brands acquired
earlier this year

 

John Lyttle, Group CEO, commented:

"The strong performance in our core UK market, across both our established and
acquired brands, demonstrates the potential to capture and grow market share
in key markets. In international markets, our proposition continues to be
significantly impacted by ongoing service disruption due to the pandemic,
which, in addition to increased recent consumer uncertainty, has weighed on
our performance.

 

The Group has gained significant market share during the pandemic. The current
headwinds are short term and we expect them to soften when pandemic related
disruption begins to ease. Looking ahead, we are encouraged by the strong
performance in the UK, which clearly validates the boohoo model. Our focus is
now on improving the international proposition through continued investment in
our global distribution network, capable of delivering in excess of £5
billion of net sales, to support future growth."

 

Investor and Analyst conference call

boohoo group plc will today host a conference call for analysts and investors
at 7.30 am GMT, and a recording of this conference call will be available
later today on the boohoo group plc investor website:
http://www.boohoogroupplc.com (http://www.boohoogroupplc.com)

 

 

The dial in details for the call are as follows:

 UK Number:             +44 (0)330 336 9601
 Participant pin code:  9556144

 

Notice of trading update

The Group intends to provide a trading update for the year ending 28 February
2022 in early March 2022.

-ends-

 

 Enquiries
 boohoo group plc
 Neil Catto, Chief Financial Officer                                     Tel: +44 (0)161 233 2050
 Alistair Davies, Investor Relations                                     Tel: +44 (0)161 233 2050
 Clara Melia, Investor Relations                                         Tel: +44 (0)20 3289 5520
 Mark Mochalski, Investor Relations                                      Tel: +44 (0)20 3239 6289

 Zeus Capital - Nominated adviser and joint broker
 Nick Cowles / Andrew Jones                                              Tel: +44 (0)161 831 1512
 Benjamin Robertson                                                      Tel: +44 (0)20 3829 5000

 Jefferies - Joint broker
 Philip Noblet / Max Jones                                               Tel: +44 (0)20 7029 8000

 Buchanan - Financial PR adviser                                         boohoo@buchanan.uk.com
 Richard Oldworth / Kim Looringh-van Beeck / Toto Berger / Sophie Wills  Tel: +44 (0)20 7466 5000

 

 

About boohoo group plc

 

"Leading the fashion eCommerce market"

 

Founded in Manchester in 2006, boohoo is an inclusive and innovative global
brand targeting young, value-orientated customers, pushing boundaries to bring
its customers up-to-date and inspirational fashion, 24/7.

In 2017, the group extended its customer offering through the acquisitions of
the vibrant fashion brand PrettyLittleThing and free-thinking brand Nasty Gal.
In March 2019, the group acquired the MissPap brand, in August 2019 the Karen
Millen and Coast brands and in June 2020 the Warehouse and Oasis brands, all
complementary to the group's scalable, multi-brand platform. In January 2021,
the group acquired the intellectual property assets of Debenhams, with the
goal of transforming a leading UK fashion and beauty retailer into a digital
department store and marketplace through a new capital-light and low-risk
operating model. In February 2021, the group acquired the intellectual
property assets of UK brands Dorothy Perkins, Wallis and Burton. As at 31
August 2021, the boohoo group had 19 million active customers across all its
brands around the world.

 

Cautionary Statement

Certain statements included or incorporated by reference within this
announcement may constitute "forward-looking statements" in respect of the
group's operations, performance, prospects and/or financial condition.
Forward-looking statements are sometimes, but not always, identified by their
use of a date in the future or such words and words of similar meaning as
"anticipates", "aims", "due", "could", "may", "will", "should", "expects",
"believes", "intends", "plans", "potential", "targets", "goal" or "estimates".
By their nature, forward-looking statements involve a number of risks,
uncertainties and assumptions and actual results or events may differ
materially from those expressed or implied by those statements. Accordingly,
no assurance can be given that any particular expectation will be met and
reliance should not be placed on any forward-looking statement. Additionally,
forward-looking statements regarding past trends or activities should not be
taken as a representation that such trends or activities will continue in the
future. No responsibility or obligation is accepted to update or revise any
forward-looking statement resulting from new information, future events or
otherwise. Nothing in this announcement should be construed as a profit
forecast. This announcement does not constitute or form part of any offer or
invitation to sell, or any solicitation of any offer to purchase any shares or
other securities in the Company, nor shall it or any part of it or the fact of
its distribution form the basis of, or be relied on in connection with, any
contract or commitment or investment decisions relating thereto, nor does it
constitute a recommendation regarding the shares or other securities of the
Company. Past performance cannot be relied upon as a guide to future
performance and persons needing advice should consult an independent financial
adviser. Statements in this announcement reflect the knowledge and information
available at the time of its preparation. Liability arising from anything in
this announcement shall be governed by English law. Nothing in this
announcement shall exclude any liability under applicable laws that cannot be
excluded in accordance with such laws.

 

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