Boohoo.com posts strong update and announces buy-back

The online fashion retailer Boohoo.com regained some investor confidence on Wednesday after reporting strong revenues and margins during the first two months of the year, also surprising with news of a share buy-back.

Revenues were 24% up in constant currency to £21.9m, translating into an increase of 31% to £139.9m for the full-year so far.

However, sales in the UK were slightly weaker than forecasts at 13% to £14.6m in the last two months as management focused on customer conversion and margin protection.

Year-on-year, UK sales grew 33% to £94.3m, while sales in the rest of Europe and in the rest of the world rose 39% and 7% respectively.

The group said it expects earnings before interest, taxes, depreciation, and amortization (EBITDA) margin for the full year to be at 10%, in line with January forecasts when the group announced a profit warning.

The company said in January that it expected growth for the second half of the year to be lower than the 31% growth seen in the first six months of the financial year, driving EBITDA margins to be at approximately 10%.

However, gross margin rose 61% for the year so far.

Boohoo is currently focused on the conversion and profitability ahead of the new Spring Summer season, with its Spring #WeAreUs campaign "positively received", trending at the number one position on Twitter on launch day, while its new website launched in September drove mobile conversion up by 40% during the last quarter.

Joint chief executives Mahmud Kamani and Carol Kane said: "We continue to build our business for the long term, as we stated at our IPO last year, and our clear objective is to deliver sustainable growth. We remain absolutely focussed on execution and are increasing our marketing spend in FY16 to drive momentum in the business."

Also on Wednesday, the retailer announced plans to seek authorisation from its shareholders to buy back up to 10% of issued share capital in order to raise the levels of cash.

Analysts said the buyback programme was "surprising". Shore Capital brokers said that "given shares are trading at 50% of float price", the buy back "may be viewed negatively in the market", while independent analyst Nick Bubb surmised that it may be "to help squeeze any short activity".

Shares in Boohoo.com were up 7.17% to 27p on Wednesday at 08:42.