Boohoo online fashion retailer sees its profits double

By Tim Bowler
Business reporter, BBC News

image copyrightBoohoo
image captionBoohoo has seen its sales rise to nearly £300m

Annual pre-tax profits at online fashion retailer Boohoo have almost doubled to £31m - up from just under £16m last year.

Its sales have jumped by 51% to almost £300m, thanks to new overseas markets.

The Manchester-based firm puts its success down to "combining cutting-edge, aspirational design with an affordable price tag".

Its booming sales growth has also been reflected in its share price, which has more than trebled in the past year.

On its stock market flotation in 2014, it was valued at £560m. It is now worth about £2bn.

The firm has gone from strength to strength in recent years, while its High Street rivals have had to deal with increasing competition from Boohoo and other online retailers.

image copyrightBoohoo
image captionBoohoo has been able to test online sales of new items, before manufacturing them in bigger numbers

"It has been a momentous year for us. The Boohoo brand has achieved outstanding revenue growth and increased profitability margins during the year," said joint chief executives Mahmud Kamani and Carol Kane.

Its only temporary misstep was a profit warning in 2015 that unnerved investors and sent its share price down by some 40% - something the online retailer has now put behind it.

"Boohoo has seen strong sales across multiple markets, and significant volume growth in sales," says John Stevenson, retail analyst at Peel Hunt.

According to its latest results, Boohoo's revenue grew 33% in the UK, more than 50% in Europe, 140% in the US and 40% in the rest of the world.

The company now has 5.2 active million customers worldwide, and crucially is able to rely on social media "influencers" and video bloggers - "vloggers" - to spread the word to its 18 to 24-year-old target market.

Digital engagement

"Boohoo has been able to halve the amount it spends on marketing over the past five years, because of this shift to social media," says Mr Stevenson.

"Relatively speaking, it has a far more engaged social media base than many other retailers - and it can use digital as a call to arms."

It is an online marketing strategy that High Street chains are now scrambling to emulate.

image copyrightGetty Images
image captionBoohoo relies on social media "influencers" and vloggers to reach its target audiences

The key to its success is that Boohoo is able to batch-produce items "in the low hundreds" to trial for sale on its website; something that is not a viable option for fashion chains with bricks-and-mortar stores.

This ability to "test and repeat" allows the online retailer to have a constant flow of new items on its website, with only about a third of them ever being reordered for bigger production runs if the initial sales prove successful.

Crucially, this means that online fashion retailers like Boohoo can potentially respond much more quickly to changing fashion tastes than can their High Street rivals.

With its constant product changes and low prices - dresses can start for as little as £8 - Boohoo can set its own prices. "They don't have to follow the lead of, say Marks and Spencer," says Peel Hunt's John Stevenson.

image copyrightBoohoo
image captionBoohoo recently bought fashion site Nasty Gal for £20m to aid its US expansion

Growth plans

Over the past 12 months, Boohoo has bolstered its international expansion plans through its £20m acquisition of struggling US fashion site Nasty Gal, which it completed in February.

The US purchase has given Boohoo access to Nasty Gal's intellectual property and customer database that will help its US expansion plans.

Earlier this year, it also bought the smaller online fashion retailer PrettyLittleThing, which was founded by the sons of Boohoo joint chief executive, Mahmud Kamani.

Boohoo plans to expand PrettyLittleThing, which has more than a million active customers, in new markets and said it had shown strong profitable growth in the first two months since the takeover.

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