Boohoo posts record first half sales but profit drops

Boohoo Group revenues increased to 975.9 million pounds, up 73 percent compared to the corresponding period in 1H20, and grew 20 percent compared to the first of 2021.

The company reported first half adjusted EBITDA of 85.1 million pounds, a decrease of 5 percent on the first half of the previous year. Compared to two years ago, however, adjusted EBITDA has increased by 40 percent. Gross margins are very similar to last year at 54.6 percent, while adjusted EBITDA margin reduced to 8.7 percent. Profit before tax was 24.6 million pounds and adjusted diluted earnings per share was 3.84p, down 15 percent on the prior half-year. Basic earnings per share was 1.44p, a decrease of 65 percent.

The company said in a release that the performance in the second quarter was impacted by UK returns rates returning to pre-pandemic levels, physical stores reopening, consumer uncertainty in markets resulting in the loss of key events and holidays, as well as continued Covid-19 related disruption across the group’s key international markets, which has impacted international delivery timeframes.

Commenting on the first half results, John Lyttle, Boohoo Group CEO, said: “Looking back over the last 18 months the group has delivered an excellent operational and robust financial performance. Entering the second half of the year, the Group is well-positioned to accelerate its growth and our confidence in the Group’s medium term targets remain unchanged.”

Boohoo’s performance across key markets

The group’s largest market continues to be the UK, accounting for 58 percent of group revenues. In the first half of the year, sales growth was 32 percent on last year and 81 percent on two years ago.

The six brands acquired since June 2020 contributed 20 percentage points to the growth on the prior year and 28 percentage points on two years ago. Gross margin decreased from 52.1 percent to 51.7 percent.

Growth in the USA has been resilient at 24 percent on the prior year against tough comparatives, with 126 percent growth being delivered over the last two years. Gross margin improved from 59.3 percent to 61.5 percent.

In the rest of Europe, growth was negative at 15 percent on the prior year, but up 20 percent on two years ago. Gross margin declined from 57.8 percent to 53.6 percent.

Rest of the world comprising mainly Australia, New Zealand and Canada reported revenue reduction of 16 percent on the prior year and 1 percent on two years ago. Gross margin increased slightly from 55.3 percent to 55.7 percent with profitability continuing to be impacted by the high distribution costs.

Boohoo expects full year sales growth of 20 to 25 percent

The company added that the expectation for full year sales growth is of 20 percent to 25 percent, implying sales growth of 20 percent to 30 percent in the second half of the financial year.

The company expects adjusted EBITDA margins to remain robust, and the group will continue to invest in its existing and new brands in order to facilitate the long-term growth opportunity.

Elevated short-term cost headwinds experienced in the first half are expected to continue in H2 alongside recent freight inflation in the company’s supply chain and wage inflation within the distribution centres. Consequently, adjusted EBITDA margins are now expected to be 9 percent to 9.5 percent, compared to 9.5 percent to 10 percent as previously guided.