Today’s Boohoo Group plc (LON:BOO) statement reveals incredibly robust Q1 trading across the Group’s brands and regions, with a positive outlook and guidance reinstated for the remainder of the financial year and beyond. In addition, the Group has announced the acquisitions of Oasis & Warehouse, bringing two well-recognised and complementary brands onto its platform. We believe the unprecedented disruption resulting from the COVID-19 pandemic has accelerated the channel shift to online where we see BOO as the clear winner, with an established and leading model positioned to consolidate the market.
- Q1 trading: Group revenue of £367.8m is up 45% YOY (Q1 FY20: £254.3m), an impressive performance that is a clear beat on the £274.6m (+8% YOY) we had forecast for Q1, and ahead of our pre-COVID forecasts. Following an initial period of disruption, sales appear to have rebounded strongly to deliver Q1 growth close to the prior-year exit run rate of +47% seen in the final two months of FY20, with performance strong across all regions and all brands. Solid revenue momentum is backed up by a 60 basis-point expansion in gross margin to 55.6% (Q1 FY20: 55.0%) thanks to its agile operating model and disciplined inventory management, giving the Group notable headroom for investment in promotional activity as the market begins to reopen and become more competitive.
- Acquisition of Oasis & Warehouse: The Group has announced the acquisition of two women’s fashion and accessories brands, Oasis and Warehouse for £5.25m in cash. The Group will follow its proven model of transitioning these brands to pure-play ecommerce propositions, integrating them into its platform where they will benefit from established infrastructure, supply chain and operational expertise. In the year ended Feb 2020, according to unaudited management information, the two brands the brands generated direct online revenues of £46.8m giving an indication of the brands’ potential. Following this transaction, the Group’s platform consists of nine complementary, fully owned, pure play ecommerce brands.
- Forecasts: Guidance in reinstated today with FY21 revenue growth expected to be c.25% with an adjusted EBITDA margin of 9.5% to 10.0%. Our forecasts move higher to reflect solid Q1 trading as well as this restated guidance resulting in FY21E EPS of 7.59p and FY22E EPS of 10.22p, up 18.8% and +13.1% respectively versus our prior forecasts. Full detail is presented in exhibit 1 below.
- Valuation: Based on our upgraded forecasts boohoo is trading on an FY21 PER of 51.3x falling to 38.1x in FY22. Boohoo Group remains a compelling proposition delivering consistent market–leading levels of growth and profitability and impressive cash generation. We believe the unpresented disruption resulting from the COVID-19 pandemic has accelerated the structural channel shift to online retail where we see BOO as the clear leader, with a proven model and in excess of £350m in net cash with which to consolidate the market.
