Boohoo.com, the online fashion retailer that immodestly describes itself as the “global fashion leader for a social generation”, is making a habit out of raising its sales guidance.
It has lifted its forecast for full year revenue growth for the third time this year - it is now expecting growth of between 30 per cent to 35 per cent, having initially anticipated growth in the region of 25 per cent. This comes despite what it warns will be tough comparative figures in the second half of its financial year with the same period a year ago.
But the group is feeling pretty bullish after a strong six months to August 31, during which revenues jumped 40 per cent to £127.2m and profit before tax was 129 per cent higher year-on-year, coming in at £14.7m. This pushed earnings per share to 1.01p, up 124 per cent.
One less bright spot was the gross margin, however, which fell 480 basis points to 55.3 per cent. This, the company said, was due to “planned investment in price and promotions” as it seeks to gain ground in a fiercely competitive clothing market.
Boohoo, which sells fashionable clothing at low prices, generates the lion’s share of its sales in the UK but its international business is expanding – it now accounts for 36 per cent of total revenue.
The buoyant results from Boohoo – which launched in 2006 and floated in London in 2014 at 50p a share – highlight how young, online upstarts are disrupting the market, while more established chains and department stores are finding life tough.
High street clothing stalwart Next warned that 2016 would likely feel like “walking up the down escalator” and department store chain House of Fraser, which was bought by China’s Sanpower Group in 2014, is also finding trading challenging. It sales in the first half of its financial year in the UK and Ireland – the 26 weeks to July 30 – were flat on the same spell a year ago.
High street retailers have been struggling against growing competition online but have also highlighted that consumers are choosing to spend less on clothing and more on leisure activities and holidays. House of Fraser also warned that the first few weeks of its third quarter have continued to be “challenging”.
Trading continues to be volatile, and has been further impacted by disruption to trade as a result of the extensive works currently being carried out in the five refurbishment stores. Accordingly, sales for the first eight weeks to 24 September 2016 declined by 2% on the same period last year.
A lot is riding on the key Christmas shopping season, which can make or break a retailer’s year. House of Fraser added:
While we…expect to see subdued trading reported for Q3, we believe we are well positioned to capitalise on the traditionally active final quarter of the financial year, particularly around the all-important Black Friday and Christmas trading period, when we typically deliver around 85% of our annual profit. We remain cautiously optimistic of delivering further growth in this Fiscal Year.
House of Fraser has been struggling to climb out of the red and in 2015 posted its fifth straight year of pre-tax losses.
In the first half of its current financial year, gross transactional value came in at 573.5m while its operating profit dropped to £1.1m from £9.2m a year earlier, although it said £3.9m of that reduction was due to the expiry of a financial services contract in June last year.