Boohoo continues to ‘defy the doubters’ as its share price surges

Boohoo has once again bucked the trend for dismal news in the world of retail, posting strong quarterly results, seeing its share price rise to a new high and snapping up the defunct online operations of Oasis and Warehouse.

Fresh from its spat with short-seller Shadowfall and a furore over top brass pay, Boohoo ‘continues to defy the doubters’, AJ Bell investment director Russ Mould said. 

The company’s share price jumped over 10 per cent this morning and currently stands up just over 7 per cent to 417.17p, marking an all-time high for the company on the London Stock Exchange.

To put the scale of the company’s share price prowess into context, a year ago it stood closer to the 222.70p mark. 

Analysts at Liberum said Boohoo’s results represented a ‘standout performance’ in the hard-nosed retail sector, dishing up decent financials and solid share price growth. 

Online-based fashion retailer Boohoo has agreed to buy the online businesses of collapsed chains Oasis and Warehouse for £5.25million. 

Boohoo already owns PrettyLittleThing, Nasty Gal, Coast and Karen Millen and has become well known for its insatiable appetite to expand and prove retail doomsayers that a fashion business, particularly one operating solely online, can blossom.

In April, Oasis and Warehouse collapsed into the hands of administrators, with 1,800 jobs lost. 

The two high-street fashion chains were forced to shut their 90 UK stores in March because of the coronavirus lockdown, which also closed its 437 concessions in department stores including Debenhams and Selfridges.

As well as revealing its deal for Oasis and Warehouse, Boohoo posted a strong set of results today, unveiling a 45 per cent rise in sales in the three months to May. 

The hike in sales to nearly £368million was reached despite a mixed picture on the selling front when lockdown started in March to early April.

Boohoo’s pre-tax profit for the year came in at £92.2million, marking a 54 per cent rise on the year. It expects revenues to rise by around a quarter for the full year. 

The group expects its capital expenditure to come in at between £60million to £80million for the year ahead, suggesting it is looking to expand further.

The company’s gross margin ticked up by 60 basis points to 55.6 per cent, with the retailer predicting this financial year will see strong growth in profitability, meaning it looks set to be able to beat market expectations. 

Last month, the group fully took over PrettyLittleThing, the fellow online retailer founded by Boohoo chairman Mahmud Kamani’s son. The company had taken a 66 per cent share in 2017 and spent £270m on the remainder. 

Analysts at Liberum said Boohoo now looks like ‘the pre-eminent leader in womenswear in the UK now operating with a stable of nine brands.’ 

AJ Bell’s investment director Russ Mould, said: ‘Any scepticism over demand for its clothes in lockdown, on the premise that its targeted demographic no longer needs to dress up to go out, looks unfounded after a stunning surge in sales.

‘The company seems to have adapted to new realities – pitching loungewear and athleisure gear at its customer base to great effect.

‘Clearly online retailers have been in a very strong position, with shops having been closed due to lockdown there has basically been nowhere else for people to go.

‘Adding insult to injury for physical retail, Boohoo continues to hoover up once proud high street names at knock-down prices.

‘Oasis and Warehouse are the latest brands added to the stable for what in relative terms is small change.

‘The company still has plenty of cash for bolt-on acquisitions that it can feed into its central operating platform.

‘Given the scale of the coronavirus crisis, consumers’ willingness to spend has been impressively resilient, the question for Boohoo is whether this can continue when the full economic fall-out feeds through.’

Jefferies analyst Andrew Wade said Boohoo’s sales model had been validated by its recent performance. He said: ‘The result clearly demonstrates the virtues of Boohoo’s nimble model – leveraging its flexible supply chain, and rapidly evolving both marketing content and product ranges to drive superior growth.’ 

Meanwhile, David Madden, an analyst at CMC Markets UK, said he thinks Boohoo’s share price will continue to rise, at least in the near future. He said: ‘David Madden, an analyst at CMC Markets UK, said: ‘Boohoo’s share price is likely to keep pushing higher on the back of the company’s strong first quarter results.’

On the purchase of Oasis and Warehouse’s online operations, Graham Spooner, an analyst at The Share Centre, said: ‘The deal to buy Oasis and Warehouse, two well-known high street names, highlights the Group’s strategy of taking brands with poor sales from the high street and transferring them onto its sophisticated internet platform, including its supply chain and infrastructure. 

‘Overall, the Group continues to maintain a good market position among younger consumers, a good growth track record with plenty of potential to increase market share over the coming months.’

In May, shares in Boohoo fell sharply after short-seller Shadowfall claimed that the online fashion retailer had exaggerated its free cash-flow by over £30million. Boohoo refuted the claims. 

Earlier this month, Boohoo was criticised for a massive £50million bonus plan for its chief executive.

John Lyttle will receive the huge sum if he increases the company’s value to around £6billion in a five-year period to March 2024.

But the lockdown has boosted online retailers, accelerating Boohoo’s share price growth – more than doubling its value to £4.8billion since Lyttle’s arrival in March 2019.

Boohoo’s online rival Asos also said it saw ‘strong’ sales growth during lockdown, while bricks-and-mortar based retailers like Primark are now racing to bolster sales after reopening their doors on Monday. 

For all retailers, however, mass job losses look set to continue hampering people’s spending levels as the true economic toll of the pandemic unfolds over the next few months.