Boohoo Group has delivered a stellar performance over the key Christmas trading period resulting in a further upgrade to FY20 guidance, its third since 5th September. Strong growth has been seen across all brands in all key geographical regions. We note the excellent performance seen at the Group’s most mature brand boohoo, where sales in the four months to December are up 42%, an acceleration on the 27% YOY growth posted in Q1 and a continuation of the exceptional 41% growth seen in Q2 of this year. Revised EBITDA margin guidance of 10.0% to 10.2% (previously c.10.0%) is after accounting for investment in three brands acquired in the year and implies strong underlying trading in the Group’s more established brands (boohoo.com PLT and Nasty Gal). The Group continues to deliver an impressive cash performance, with £245m net cash at 31 December.
- Record performance: Group P3 revenue of £473.7m is up an impressive 44% YOY. All Group’s brands performed strongly in the period delivering market share gains. Boohoo revenue of £232.6m is up 42% YOY, with PrettyLittleThing +32% at £190.8m versus strong prior year comps, and Nasty Gal more than doubling prior year sales at £41.5m, +102% YOY. Newly acquired brands Miss Pap, Karen Millen and Coast are said to be showing great promise, generating combined revenue of £8.8m in the period. Group gross margin of 53.5% is down 70 basis points YOY. Despite this investment in gross margin and the start-up costs associated with the three brands acquired in the year, improved EBITDA margin guidance for FY20 of 10.0%-10.2% implies the Group’s core boohoo.com and PLT brands are achieving levels of profitability comfortably ahead of the medium-term 10.0% EBITDA margin guidance.
- Guidance upgraded: Revenue growth for the year to 29 February 2020 is expected to be 40% to 42% (previous guidance of 33% to 38%) with EBITDA margin to be in the range of 10.0% to 10.2% (previous guidance of around 10.0%). This is the third upgrade to FY20 guidance since 5th September, equating to a cumulative EBITDA upgrade of more than 10% over the course of the year, after accounting for investment in new brands. Despite this, guidance feels consistently conservative with the current outlook implying Group revenue growth of just 28% in the final 2 months to February.
- Zeus Capital Forecasts: We move our forecasts higher reflecting the upgrade to guidance. FY20E Group revenue of £1,209m is +2.7% versus previous forecasts with EBITDA of £121.9m +3.5% and EPS of 5.43p +4.0%. See exhibit 4 for detail.
- Valuation: Trading at 58.7x FY20 PE boohoo boasts impressive growth, solid margins and a strong track record of consistently delivering against guidance. Current valuation is supported by a conservative DCF implying 6% upside.