April 25, 2018 / 6:39 AM / in 6 months

Online fashion retailer Boohoo's sales almost double

LONDON (Reuters) - British online fast-fashion retailer Boohoo (BOOH.L) beat forecasts with a 40 percent jump in annual profit and an almost doubling of revenue as its mainly younger customers snapped up its budget-friendly designs.

The company, which imitates the latest fashions and sells them at “pocket money” prices to mainly twentysomethings, said it had made a strong start to this year, sending its shares as much as 18 percent higher.

Its robust performance and that of bigger online peer ASOS (ASOS.L) highlights how the Internet is reshaping the British retail landscape and the clothing sector in particular.

“Against a backdrop of difficult trading in the UK clothing sector, the group continued to perform well, gaining market share in the expanding online sector,” said joint chief executives Mahmud Kamani and Carol Kane.

Founded in Manchester, northern England, in 2006, Boohoo has expanded rapidly, purchasing the PrettyLittleThing and Nasty Gal brands at the beginning of last year.

The pure internet players are bucking a challenging backdrop for UK consumers, outflanking and taking market share from traditional rivals burdened with big store estates.

Last week the 240-year old Debenhams (DEB.L) department store chain reported a 52 percent slump in first-half profit and warned on the full-year outlook for the second time in four months.

In stark contrast, Boohoo raised sales and profit guidance four times in 2017-18.

The company made a pretax profit of 43.3 million pounds in the year to Feb. 28, up from 30.9 million a year earlier and topping the 39.4 million pounds expected by analysts, according to Reuters data. Revenue soared 97 percent to 579.8 million pounds, ahead of company guidance.

Shares in Boohoo, which listed in 2014 at 50 pence, were up 21.4 pence at 176 pence at 0835 GMT, valuing the business at 2 billion pounds.

The stock has come off from 273 pence in June last year, on concerns profit growth will be held back by a step-up in investment.

However, Boohoo said on Wednesday it could invest more in systems, technology, warehouses, distribution and marketing, while still delivering substantial sales and profit growth.

Capital expenditure in 2018-19 would be 50-60 million pounds. Revenue growth was forecast at 35-40 percent, with a profit (EBITDA) margin of 9-10 percent.

Looking beyond 2018-19 it forecast sales growth of “at least” 25 percent, whilst maintaining a 10 percent EBITDA margin.

“Critically, fears of a ‘margin reset’ have not been realised,” said analysts at Peel Hunt, reiterating their “buy” recommendation.

“Changes to distribution plans means the next move is likely to be overseas,” they said.

Editing by Jason Neely and Louise Heavens

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