Online fashion retailer boohoo (LON: BOO) is reporting its full year figures on Wednesday 5 May and much has changed with the business compared with one year ago.
The AIM-quoted retailer remains profitable and highly cash generative and it has added retail brands to its portfolio as rivals have fallen into financial difficulties. These purchases have been done at attractive prices and there will be some initial indications at how things are going.
There has also been controversy about suppliers and the way that they have behaved. The UK supplier list and sustainability strategy were published in March.
There will be a combination of acquisitive and organic growth in the financial year to the end of February 2021.
Analysts are expecting significant growth in revenues and profit. The EBITDA margin is expected to be around 10%.
Revenues are expected to increase from £1.23bn to just over £1.7bn, while pre-tax profit could improve from £108.3m to around £147m. Earnings per share would then rise from 6.1p to around 9p.
Expectations appear highly achievable and there is a good chance that they could be beaten.
There will be more news concerning the sustainability strategy with the figures and a sustainability report will be published alongside the annual report.
An independent review into Leicester-based suppliers was published last year and the recommendations are being implemented. A lot of investment has been put into auditing suppliers and strengthening internal management of suppliers. This controversy has undoubtedly held back the share price.
Dorothy Perkins, Wallis and Burton were acquired for £25.2m in early February, so they will not have contributed much last year. That followed the purchase of IP related to Debenhams for £55m. This purchase provides the opportunity to add more beauty brands.
Last May, the 34% minority stake in PrettyLittleThing was acquired for £269.8m. That was partly financed by a placing raising £197.7m at 340p a share. This removes the minority interest and is the reason why earnings per share are expected to increase by a higher percentage than pre-tax profit.
Securing third-party brands for the Debenhams platform will be important when it comes to making the most of that acquisition. There should be news about how the latest acquisitions have fared and the plans to exploit the retail brands.
Since the year end, boohoo has spent £72m on a new office in Soho that will house the London-based brands. These include Debenhams, Dorothy Perkins, Oasis, Warehouse, Wallis, Coast and Karen Millen. There will be around 600 employees using the office.
At the end of February 2020, there was net cash of £240.7m and this February it should be a similar amount, although some analysts expect a higher figure.
A lease has been signed on a new warehouse in Daventry and that will require more than £50m of investment in the coming years. That should be financed out of cash flow. The warehouse capacity will be more than £4bn.
Current trading is expected to be strong. Growth has been in the mid-teens recently. There should be confirmation about whether that growth rate is continuing. Remember that the like-for-like comparatives will become tougher in the coming months, although the revenues of the additional brands will boost growth.
There will be changes in demand as lockdown is eased. This time last year, loungewear was being bought and there is likely to be more clothing for going out. Management will need to get its stock choices right.
The share price is 340.1p, which is equivalent to 38 times estimated earnings. If pre-tax profit reaches £175m this year the multiple could fall to 30. In the short-term, the concerns about suppliers will continue to hold back the share price and prior to the results the price seems fair.