Jan 15, 2019

Online retailer Boohoo.com cheers up after Asos sales upset

Last month, larger competitor Asos warned on profit after a need for heavy discounting halved its operating margin to 2 per cent - dragging its share price down almost 40 per cent, and Boohoo's partway into the slough of despond. Analysts at Citi calculated that Boohoo's updated guidance of 43-45 per cent full-year sales growth would ensure annual earnings before interest, tax, depreciation and amortisation of £80m - comfortably meeting consensus expectations. An implied fourth-quarter growth rate of 32 per cent looked conservative, against the 47 per cent achieved year-to-date. First, while sales under the Pretty Little Thing fashion brand were nearly double those in the same period last year, sales under the group's largest brand, Boohoo itself, rose only 15 per cent to £163.5m - slower than the forecast 18 per cent, despite what Barclays described as a "Markedly easier comparative". Second, the company has long said it can achieve sales growth of 25 per cent at an ebitda margin of 10 per cent, but to keep Pretty Little Thing growing anywhere near its current rate will require margin-testing investment - and the ebitda margin range has already been tightened.

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