Boohoo upgrades guidance, buys majority stake in PrettyLittleThing

Online retailer Boohoo.com upgraded its guidance for full-year 2017 on the back of a strong trading performance, as it announced the acquisition of a majority stake in fashion brand PrettyLittleThing.

The company said it has continued to perform well since the interim results at the end of September, with strong trading across the Black Friday weekend and encouraging peak season trading.

As a result, the group now expects to deliver revenue growth of between 38% and 42% in full-year 2017, up from previous guidance of between 30% and 35%.

In addition, Boohoo said it continues to benefit from improved operating leverage in the business and now expects an earnings before interest, taxes, depreciation and amortisation margin of 11% to 12% in FY17, compared to previous guidance of 11%.

Boohoo also said on Wednesday that it has bought 66% of rival PrettyLittleThing for £3.3m in cash, in a deal that is expected to complement its presence in the UK and internationally.

In the year ended 29 February, PrettyLittleThing revenue grew more than 400% to £17m and it is expected to achieve revenue growth in excess of 150% in the year ended 28 February 2017.

Chairman Peter Williams said: “PrettyLittleThing was always going to be a natural fit with boohoo.

“We believe this is an excellent opportunity to extend the group's overall customer appeal through two distinct, complementary brands while further enhancing the group's strong growth trajectory. We look forward to building on PrettyLittleThing's success and we welcome Umar and his team to the group."

Shore Capital said: "Today’s statement gives us confidence to reiterate our bullish stance around the group. We feel the business is delivering revenue and profit growth simultaneously and has acquired a fast growing business at what we would view is a significant discount to its intrinsic value. We reiterate our 'buy' recommendation on boohoo."

Meanwhile, Peel Hunt said it expects PrettyLittleThing to add around £1-2m to EBITDA next year.

"Taken in conjunction with trading upside, we upgrade 2018FY pre-tax profit to £34m from £31.8m. We reiterate our 'buy' stance and see more upgrades to come."

Investec upgraded Boohoo to ‘buy’ from ‘add’ on the news and lifted the price target to 150p from 130p.

"Boohoo continues to deliver top line growth ahead of expectations, with ongoing operational leverage gains driving double-digit upgrades.

“In addition, the long-awaited acquisition of PrettyLittleThing (PLT) is a further welcome development in our view, adding to the group’s long-term growth potential,” the brokerage said.

At 1430 GMT, the shares were up 11.6% to 132p.