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September 27, 2018

Boohoo strategy impresses as half-year earnings beat analyst expectations

The company has upgraded its sales growth for the full year as first-half revenues went beyond analysts’ forecasts, which has prompted a sharp rise in its share price.

By MarketLine  

Boohoo yesterday released its financial results for the first half of 2018. The company has upgraded its sales growth for the full year as first-half revenues went beyond analysts’ forecasts, which has prompted a sharp rise in its share price.

Group revenue compared to the same time in 2017 is up an astonishing 50.4%, with one of Boohoo’s owned brands, PrettyLittleThing, up 132%.

Boohoo Group has proven its inherent understanding of its customers as PrettyLittleThing continues to drive impressive growth with sales rising by £95.9m to £168.6m, compared to an increase of £27.2m to £209.0m for boohoo.com as the brand matures.

The share price at the time of writing has seen double-digit growth to 219 pence. The rise gives Boohoo a market capitalization of £2.39bn, which is some 20 times the equity value of 240-year-old Debenhams.

Celebrity endorsements are proving effective

Although not a unique strategy, Boohoo’s collaborations with celebrities seem to be implemented with precision each time, endorsing the brand through social media and their own clothing releases as millennials aspire to dress like their hottest influences.

Be it Boohoo x Paris Hilton, PrettyLittleThing x Maya Jama or even BoohooMan x Dele Alli, the strategy has led to increasing sales through its online platform and with the three brands Boohoo, PrettyLittleThing and Nasty Gal constantly working with celebrities to boost clothing lines; millennials can’t get enough of these cost-effective purchases.

The partnerships, the lavish launch parties, and their out-of-the-box marketing schemes seem to separate the retailer from its midmarket fashion rivals, which are struggling to make as much progress in sales terms.

British clothing retailers like Marks & Spencer and Debenhams have seen profits slump and are closing stores, but pure internet players like ASOS and Boohoo are tapping into a generation of consumers who shop on their mobile phones and share fashion tips via social media.

Distribution potential and a new CEO boost investor confidence

The Boohoo brand’s distribution centre in Burnley is currently being extended, which will mean more space for stock and a larger delivery network, further improving its service. It is said to provide the group with the potential of generating £3bn of net sales globally which will hit heights more than any other English retailer has achieved before.

The appointment of John Lyttle, the former chief operating officer of Primark, as CEO will also give investors extra confidence in the direction Boohoo is heading. As Boohoo arguably is hitting a period of maturity, the new perspective John Lyttle can provide will help the retailer massively, as such success strategies have been witnessed with the likes of Primark in the past.

With its ongoing focus on automation and its efforts on driving efficiency, Boohoo is in a position to continue strong growth as customers continue to demand quicker delivery options.