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boohoo.com plc

boohoo.com plc 53% group growth delivered in Q1 – Zeus Capital

boohoo.com (LON:BOO) has delivered solid Q1 Group revenue growth of 53% to £183.6m, with standout like-for-like growth of 158% delivered by PLT. At a Group level, the UK saw strong growth of 49%, while international sales were up 60%. Group gross margins increased 100bps to 55.2%, reversing the downward trend seen over the last few years, driven by strong full-price sales performance in PLT. The boohoo brand delivered growth of 12%, however we flag this is versus a tough comp of 48% growth in Q118, with increased sales and promotional activity early in the quarter causing a reduction in gross margin to 52.0% from 53.9%. Promotional activity has since slowed, and the GM exit rate actually was up YoY, giving scope for the business to implement growth measures which should boost growth rates as the comps get easier.

As a result of the stellar growth delivered by PLT, we nudge up our FY forecasts by c.2-3% accordingly just six weeks post finals, with FY sales growth now expected of 38% to £802m (£786m) and adj. EBITDA of £74.6m (£72.8m). The Group finished the quarter with a very strong net cash position of £151m, up from £133m at the February year end.

boohoo continues to gain market share and build brand awareness, while comps get easier throughout the year. Although boohoo Q1 sales growth YoY of 12% to £97.2m appears modest, this is against a comp of 48%. It also represents an impressive 2-year CAGR of 29.2%, an improvement from 26.8% delivered in Q418. Following the Q1 sales and promotional activity, boohoo is well positioned to benefit from growth measures throughout the rest of the year, and the impact of influencers such as the collaboration with Paris Hilton due to launch in June and build on its market share gains and current momentum.

158% growth delivered by PLT, upcoming July warehouse move is key. PLT continues to deliver strong triple digit growth across the UK and Internationally, coupled with strong retail margins of 60.3% (Q118: 56.2%) as there was less promotional activity. Plans for the end of July warehouse move to Sheffield remain on-track.

Trading in line, FY19 guidance unchanged. Management have confirmed today that current trading is in line with expectations. FY19 guidance is unchanged, with group revenue growth expected to be 35%-40% and EBITDA margins between 9%-10%, with medium-term sales growth of c.25% and c.10% EBITDA margin.

Valuation. As a multi-branded, leading e-commerce business, boohoo continues to deliver premium growth alongside premium margin, which remains a discount to ASOS and Zalando despite higher growth forecast and superior margins. With the shares +42% since the FY18 results in April, boohoo is trading on an FY19 EV/EBITDA of 32.1x falling to 25.1x in FY20. Management remain committed to growing the Group into a £3bn revenue company, with a solid, cash backed balance sheet to support its ambitious growth targets.