Boohoo sales continue to soar despite Q2 wobble, H2 starts well
Boohoo Group hit another sales record in the first half with the ever-expanding company reporting Thursday that H1 sales were even closer to the magic £1 billion figure and that it doubled its market shares in the UK and US over the last two years.
The company’s sales for the six months to August 31 rose 20% year-on-year (YoY) to £976 million and by 73% compared to H1 in 2019 (2YoY).
That said, it reported £85 million of adjusted EBITDA, which was down 5% due both to “exceptional levels of profitability last year” and to heavy investment for growth. But it was up 40% on a two-year basis, despite £26 million of freight and logistics cost inflation. Adjusted pre-tax profit fell 20% to £63.8 million YoY but rose 23% 2YoY.
It also said it now has a “significantly enhanced target addressable market, with up to 500 million potential customers in key markets” following various acquisitions it has made in the last year with acquired brands (such as Debenhams) integrated and relaunched during the first half.
Of course, to support all this, it also increased its warehousing and distribution capacity during the period, so it’s now capable of supporting over £4 billion of net sales.
Importantly, Boohoo also said that consumer demand improved through August, principally in the UK but also in key overseas markets such as Ireland and France, “where there has been a re-acceleration in the rate of growth”. And this continued in September, “where the rate of gross sales growth has increased compared to that achieved in the second quarter of the financial year”.
That’s good news because, looking more closely at the first half, it said the performance in the second quarter “was impacted by UK returns rates returning to pre-pandemic levels, physical stores reopening, consumer uncertainty in markets that we operate in resulting in the loss of key events and holidays, as well as continued Covid-19-related disruption across the group's key international markets, which has impacted international delivery timeframes”.
But the company is upbeat for the future and, as mentioned, is investing heavily in its acquired brands. For the full year, it expects sales growth of 20-25%, implying sales growth of 20-30% in the second half.
The re-acceleration in the rate of growth compared to that achieved in the second quarter means it believes adjusted EBITDA margins will “remain robust”, and it “will continue to invest in its existing and new brands in order to facilitate the long-term growth opportunity”.
But “elevated short-term cost headwinds experienced in the first half are expected to continue in H2 alongside recent freight inflation in our supply chain and wage inflation within our distribution centres”.
That means those robust adjusted EBITDA margins are now expected to be 9-9.5%, compared to 9.5-10% as previously guided. And capex is now expected to be around £275 million for the year, slightly above the top end of previous guidance of approximately £250 million.
CEO John Lyttle said: “Looking back over the last 18 months the group has delivered an excellent operational and robust financial performance, and that is a testament to all who have helped deliver this.
"We are delighted to have doubled our market share in key markets, have significantly expanded our target addressable market through selective acquisitions and are excited about the global potential for all of our brands. Entering the second half of the year, the group is well-positioned to accelerate its growth and our confidence in the group's medium term targets remain unchanged".
He added: "We will continue to invest across our platform, people and technology as we look to further cement our position as a leader in global fashion e-commerce”.
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