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boohoo.com plc

boohoo.com plc Lift in FY17 guidance yet again, benefit of improved operating leverage

boohoo.com plc (LON:BOO), the leading online fashion retailer, has delivered a strong trading performance since the Group’s trading update on 10 January 2017. The Board now expects the Group revenue growth for the twelve months to 28 February 2017 (“FY 17”) to be around 50%, ahead of the previously guided range of 46% to 48%. The Group continues to benefit from improved operating leverage in the business and now expects to deliver an adjusted EBITDA margin at the top end of the previously guided range of 11% to 12%. This guidance relates to boohoo.com and prettylittlething.com, which has been consolidated from 3 January 2017.

Zeus Capital said:

The company has continued to trade strongly in the final two months of the year to February. As a result management are increasing FY17 guidance at the sales and EBITDA levels in this morning’s pre-close trading update. Headline sales growth is now expected to be c.50%, ahead of the previously guided range of 46% to 48% given on 10th January. This results in a 1.5% increase in revenue forecasts. The EBITDA margin is now expected to be at the top of the previously guided range of 11% to 12% as the business benefits from operating leverage. This drives a 5.2% upgrade to our estimate. Further guidance on FY18 will be given at the FY17 results on 26th April. We also note that the Nasty Gal acquisition is expected to complete today as per the RNS on 9th February.

* Upgrades to FY17 forecasts. Our FY17 group sales estimate increases by 1.5% to £293.1m (£288.7m), implying 50.0% YoY growth (full year guidance is now for c.50% versus previous guidance of between 46% to 48%). Our FY17 adj. EBITDA forecast increases by 5.2% to £35.0m (£33.3m). This equates to a margin of 11.9% with management now guiding towards the top end of the previously guided range of 11% to 12%.

Year-end Feb FY17 New FY17 Old % Chg
Revenue (£m) 293.1 288.7 1.5
Revenue growth (%) 50 47.8
Gross Profit (£m) 158.8 156.5 1.5
Margin (%) 54.2 54.2
Adj. EBITDA (£m) 35 33.3 5.2
Margin (%) 11.9 11.5
Source: Zeus Capital estimates

* FY18 forecasts remain unchanged ahead of FY results expected 26th April. We are forecasting an EBITDA margin of 9.8% for FY18 as we expect BOO to continue to invest significantly in growth and the customer proposition in order to maintain current momentum and continue to take market share. There will also be a dilutive impact from PLT which we expect to deliver 3% margins as the business continues to grow (for FY18, we conservatively assume 25% sales growth for PLT to £53.1m).

* It continues to deliver premium growth and premium margin. The revised guidance for sales growth and margin demonstrates the strengths of the boohoo’s brand led model over established peers such as ASOS and Zalando who are growing at c.25% delivering single digit EBITDA margins of c.7%.

* Valuation. boohoo.com plc is trading on an EV/EBITDA of 44.9x and 39.6x to Feb 17 and Feb 18 respectively, and P/E of 67.3x and 60.6x. Throughout the year there has been numerous earnings upgrades that have driven multiple expansion, and forecasts continue to try and catch up. We feel there is scope for the share price to continue to move higher as the company continues to gather market share, invest in growth and demonstrate the significant strengths of the business model.

The boohoo Group will announce its Preliminary Results for the twelve months to 28 February 2017, and provide detailed financial guidance for FY 18, on 26 April 2017.