Boohoo bucks trend of UK retail lull - What the analysts say
Online retailer Boohoo has posted a 43% jump in first-half sales to GBP564.9m (US$702.1m) at a time when many UK retailers are battling slow-to-no sales growth. It marks the first time in the group's history that revenues have exceeded GBP1bn over a 12-month period. And with the recent acquisitions of women's pureplay retailer MissPap and British high street brands Karen Millen and Coast, its success shows no sign of waning anytime soon.
Greg Lawless, retail analyst, Shore Capital, says:
"The Boohoo Group has real momentum and continues to win market share globally. The recent acquisitions in Karen Millen and Coast broaden the product range into older demographics group and increase the potential addressable market that the group can serve. Boohoo is our top pick amongst the clothing retailers and we highlight the international prospects of the business (now 44% of group revenues), growth across all brands, the strength of the balance sheet and the opportunity to scale the recent acquisitions through the group's multi-brand platform."
Emily Salter, retail analyst at GlobalData, says:
"The Boohoo Group continues to defy the gloom of the UK retail sector, yet again reporting impressive revenue growth as its young shoppers are undeterred from spending on fashion despite economic uncertainty. Despite making three acquisitions this year (MissPap, Karen Millen and Coast), the group's revenue acceleration stems from the strength of its existing brands, especially PrettyLittleThing which continues to outshine boohoo.com as it starts to mature, yet still generates growth that other retailers can only dream of.
"In August, the Boohoo Group purchased premium womenswear brands Karen Millen and Coast, a far cry from its previous young fast fashion acquisitions. While this provides the group with a means of extending its reach, which is no bad thing due to the competition in the youth value clothing market, the acquisition risks devaluing Coast and Karen Millen as they rely on high-quality product and sophisticated designs. Boohoo must protect their positioning as premium brands, which will require investment in product quality and fit, but this is integral for the acquisition's success."
Elliott Jacobs, EMEA Commerce Consulting Director at LiveArea, says:
"Boohoo's success in the first-half of this year is a sure sign that today's marketplace is truly global. Internationalisation is now an inescapable part of commerce, and those retailers that are failing to seek international opportunities are increasingly going extinct. While many brands have shied away from overseas markets because of their complexity, the financial pull is now too great to ignore. Indeed, from Europe and the Americas to Africa and Asia, digital trade is seen as means to supercharge their economies in the coming years. That being said, brands face many challenges when expanding internationally.
"Today's consumers demand a frictionless journey and, given the low adoption of digital payments in many economies, their experience can be anything but seamless. What's more, local stocking and distribution complexities, plus weak delivery and supply-chain infrastructure can prevent the implementation of efficient deliveries. This means that brands are unable to meet customer expectations and lose them as a result, undermining brand perception and affecting returns and exchanges. What Boohoo has done so effectively is combine outstanding digital experiences with rapid speed-to-market and efficient logistics, and a focus on technology and automation has seen them become a shining light globally. Its brands are incredibly hot on trends and compressed production cycles. A tight grip on supply chain and fulfilment is essential to support this approach, and Boohoo has invested heavily in automation and global distribution logistics. New items are appearing faster, consumers are buying, and receiving their goods quicker, and even returns and refunds are processed quicker than ever. Expanding internationally is a daunting prospect, but the rewards far outweigh the challenges. To drive success, brands must realise that understanding the factors that drive change is key to successfully penetrating overseas markets, whether it be consumer trends, the market, technology or regulations."