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Boohoo bucks UK retail trend with upbeat sales forecast

Wednesday, April 26, 2017 - 21:01

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British online fashion retailer Boohoo forecast sales growth of 50 percent in its new financial year after a doubling of profit in 2016-17, resisting signs from other retailers that shoppers are turning cautious on spending.

[LONDON] British online fashion retailer Boohoo forecast sales growth of 50 percent in its new financial year after a doubling of profit in 2016-17, resisting signs from other retailers that shoppers are turning cautious on spending.

Recent official data, industry surveys and company comments, for example from Carpetright and Costa Coffee owner Whitbread on Tuesday, have indicated that Britons are starting to feel the strain of rising prices after last year's vote to leave the European Union sent the pound plunging.

However, annual results from Boohoo on Wednesday showed that some bright spots, particularly in value retailing, remain.

Boohoo, which sells own-brand clothing, shoes and accessories online to a core market of 16-24 year-olds, has been one of the best performing UK stocks over the last year, almost quadrupling in value. "Trading in the first few weeks of the 2017-18 financial year has made a promising start," said Mahmud Kamani and Carol Kane, Boohoo's joint chief executives, echoing comments from Primark, the discount fashion retailer, last week.

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The company expects group revenue growth in 2017-18 approaching 50 per cent, including growth from the acquisitions of the PrettyLittleThing and Nasty Gal brands at the beginning of this year. A profit margin of 10 percent was forecast. "The acquisitions represent a step change in the size, structure and operation of the group," said the joint CEOs.

Boohoo and online rivals such as ASOS are winning share from traditional high street retailers, benefiting from the increasing popularity of smartphone e-commerce and their extensive use of social media.

Boohoo made a pretax profit of £30.9 million (S$53.6 million) in the year to Feb. 28 - ahead of analysts' average forecast of £28.7 million, according to Reuters data, and £15.7 million made in 2015-16.

Revenue rose 51 per cent to £294.6 million as Boohoo's customer base grew 29 per cent to 5.2 million, while international growth, particularly in the United States, exceeded management expectations.

Boohoo floated at 50 pence a share in 2014 but the stock was hammered by a profit warning the following year. Its shares have since recovered strongly and are up 36 per cent so far this year.

They were, however, down 3 per cent at 184 pence at 0908 GMT, giving a market capitalisation of £2 billion - more than treble the value of UK department store chain Debenhams.

Analysts at Peel Hunt, who have a "buy" rating on Boohoo upgraded their 2017-18 pretax profit forecast to 40 million pounds. "With strong trading momentum from autumn/winter likely to have provided a good start to the new season, trading updates are unlikely to disappoint and the medium term outlook remains encouraging," they said.

REUTERS

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