RE: Paul Scott Small Cap Value Report Stockopedia30 Sep 2020 22:54
Sparkling results today, from Booho multi-brands (9 at the last count) fashion eCommerce business. The share price anticipated these numbers, as well as brushing aside the supply chain review published recently. That particular teacup has now recovered from storm conditions, despite some journalists' attempts to stir it up as much as possible.
Note that the allure of cheap fast fashion has clearly overwhelmed customers worrying too much about where or how the product is made. Rightly so, as practically the whole sector uses cheap labour from abroad, Bangladesh, etc. Arguably machinists allegedly working in Leicester for low wages because they're simultaneously claiming benefits, is a far more ethical setup than a sweatshop with fire exits chained shut in Bangladesh, and machinists being paid 50p per hour there. But we could discuss that ad infinitum, let's get back to the figures.
The growth is highly impressive, given that Boohoo is now a sizeable group.
Note the gross margin is strong, and has gone up a bit. There's some wholesaling activity, which is lower margin, so the retail only margin will be higher still than the reported 55% total.
Looking back at the Q1 (Mar-May) trading update published on 17 June 2020, it also reported +45% revenue growth. That was during lockdown though. Hence there was a question mark over whether Q2 would see growth slowing, given that physical shops re-opened. That BOO maintained +45% growth, despite its competitors coming back, is really impressive. BOO seems to have generated its own momentum, and doesn't seem to be affected by what the High Street does.
Guidance is raised for the full year, FY 02/2021;
Group revenue growth for the year to 28 February 2021 is expected to be 28% to 32%, up from approximately 25% as previously guided, with adjusted EBITDA margin for the year at around 10%, increased from the 9.5% to 10% as previously guided. The group has made a good start to the second half of the year, with momentum continuing into September...
That bar looks set low, because H1 revenue is up 45%, hence 28-32% full year implies a big slowdown in growth in H2. History shows that BOO tends to under-promise, and over-deliver.
Its test & repeat model means that supply can be quickly adjusted not just to fashion trends, and repeat orders for bestsellers, but also can be quickly adjusted according to overall macro conditions. Compare that with the big problems physical retailers have with planning product deliveries months in advance.
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