Boohoo – 10% less customers, 11% less orders but an 11% increase in order value, just where is this brand going and are its shares good value
It is now all about rebuilding profitability and getting back to growth for the boohoo Group (LON:BOO) after the latest set of results.
The £487m capitalised Manchester-based multiple brand-owning retail group, which has built up significantly over the last few years, reported revenues down 11% at £1.77bn (£1.98bn), while its adjusted pre-tax profits fell from £82.5m to a £1.6m loss.
Cost pressures including raw material price inflation, the increased cost of freight, combined with stock clearance and lower sales volumes had significant impact over the year to end February 2023.
Over the last year it spent some £91m on building up its infrastructure to handle efficiently a brand with over £4bn of sales. In so doing it has invested heavily in the automation of its Sheffield site and in its US distribution centre.
It has a clear target of an addressable market of up to 500m potential customers.
The group last year had 18m active customers, which was 10% down from 19.9m the previous year.
Changes in customer behaviour saw it handle 11% less orders at 55.5m (62.4m), while the average order value actually increased 11% to £53.32 (£48.16).
CEO John Lyttle stated that:
"Over the last three years, the Group has achieved significant market share gains.
Looking ahead, we are investing for the future growth of this business with automation, local fulfilment capacity in the US and building global brand awareness.
We will deliver sustainable returns on these investments. We will continue to give our customers the latest trends, outstanding value and a great experience.
Our confidence in the medium-term prospects for the group remain unchanged, and as we execute on our key priorities we see a clear path to improved profitability and getting back to double digit revenue growth.”
Analyst Opinion – 63.5p per share valuation
Rachel Birkett at Zeus Capital expects lower growth this year and next but is impressed with the medium-term guidance in a return to double-digit growth and increased profitability.
Her estimates for the current year to end February 2024 are for £1.72bn sales and a £13.4m adjusted pre-tax loss.
But going into the following year she sees £1.81bn sales giving a profit of £1.2m.
She does, however, have an intrinsic valuation of the group’s implied enterprise value at £801.5m, which equates to 63.5p per share, after net debt.
Conclusion – recovery time is necessary
Cost headwinds have certainly taken their toll, however, given time this group is determined to return to substantial profits and in doing so give its shareholders a meaningful return for their investment.
The return to double-digit revenue growth will certainly take time, possibly another three years, so the big question now is just where its shares are going?
After this morning’s news the shares were down 5% at 38p.