Boohoo shares surge as retailer sees virus-busting sales growth

June 17, 2020

Boohoo, the online fashion retailer, has seen its share price surge after reporting stronger than expected sales growth during the coronavirus pandemic.

The company's trading update and updated forecasts for sales, which exceeded market expectations, also confirmed a story by Sky News that it had snapped up the online operations of Oasis and Warehouse for £5.25m.

Boohoo said the acquisition to its multi-brand platform would help it build momentum as it bucked the trend of plunging sales for high street competitors - largely shuttered since late March because of the COVID-19 lockdown.

The company bought Karen Millen and Coast last year and said on Wednesday that they were "trading strongly" as it reported a 45% leap in sales to £368m during its first quarter covering the three months to 31 May.

That smashed analysts' forecasts amid the coronavirus crisis.

Boohoo said sales gathered pace as the quarter evolved, following a slow start.

The company, which owns the Nasty Gal and PrettyLittleThing brands, has become a hit with a generation of younger consumers who shop on their mobile phones and share fashion tips on social media.

Chief executive John Lyttle told investors: "Whilst there is a period of uncertainty within the markets in which we operate, the Group is well-positioned to continue making progress towards leading the fashion e-commerce market globally."

At a time when few companies are prepared to stick their necks out with market guidance, Boohoo said it was forecasting revenue growth of approximately 25% for the current financial year to February 2021.

Shares, which were as much as 10% up at Wednesday's open, are more than 40% higher in the year to date, placing Boohoo among the few big winners for investors at a time when the wider market is recovering from a coronavirus-led slump.

The shares closed 6.6% higher.

Commenting on the performance Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Acquisitions are an important tool in boohoo's armoury, because the share price valuation demands exponential growth, and there's only so much fuel left in the tank of the flagship brand.

"What will be interesting is how many further buying opportunities are kicked up by coronavirus.

"We can expect a handful of struggling retailers to fold in the coming months, and Boohoo's cash-laden balance sheet means it will be able to pounce.

"Gearing up for future growth doesn't come cheap though, and capital expenditure is expected to spike in the current financial year. That's all well and good so long as sales growth follows suit - if it doesn't then the added scale becomes a drag, rather than a benefit, for profits."

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