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Boohoo.com sales up 62pc
Online fashion retailer attempts to justify £600m valuation with increase in annual sales
The newly-listed online fashion retailer Boohoo.com says annual sales have increased by 62pc as the company attempts to justify its lofty stock market valuation.
The company is part of a collection of online retailers to enjoy a surge in its share price in 2014 despite only just breaking even.
Boohoo.com said in a trading update on Monday that earnings before interest, taxes, depreciation, and amortisation for the year to end of February increased by more than 200pc on last year’s £3.9m. Annual revenues reached £109m.
However, even with profits trebling, Boohoo.com is trading on roughly 50 times estimated annual earnings. Shares in Boohoo.com edged up by 1, or 2pc, to 52p on the back of the update, valuing the Manchester-based company at almost £600m.
The company’s shares have fallen slightly in recent days after rival retailer Asos issued a profits warning.
Boohoo.com sells own-brand clothing aimed at 16 to 24-year-olds. It is slightly cheaper clothing than Asos and produces its own fashion from the company’s base in Manchester.
The retailer was founded by Mahmud Kamani and business partner Carol Kane in 2006.
Mr Kamani, the co-chief executive, has said the 50 times earnings multiple reflected the potential in the business.
“I don’t know anything about a bubble, I know about Boohoo. The valuation is set by the market and the investors. We need to invest in our business,” Mr Kamani stated.
The Kamani family arrived in Manchester after fleeing war-torn Kenya in the 1960s. Abdullah Kamani, Mahmud’s father, built a multi-million pound textile empire in the northwest of England, with brands including Starsign and Jogo.
Analysts at Oriel said Boohoo.com’s trading update “highlights the strength of the brand in delivering strong growth at the top line and the company’s ability to turn the revenue growth into profits”.
Alistair Davies at Oriel said: “Moving into [the new financial year], the growth prospects for the business look strong in both the UK and internationally as the business invests in increased levels of marketing and local language and currency websites.
“Whilst no comment has been made on current trading, we estimate that the group’s exit growth rate is in excess of 30pc.”