LONDON (ShareCast) - (Sharecast News) - Boohoo shares were surging on Thursday morning, after it reported fourth quarter net sales growth of 7% in a trading update, in line with guidance.
Boohoo shares were surging on Thursday morning, after it reported fourth quarter net sales growth of 7% in a trading update, in line with guidance.

Its net sales growth over the full year came in at 14%, which was also in line with its lowered expectations set in December.

The AIM-traded online fashion retailer said that in the final quarter, gross sales growth was strong at 26% year-on-year and 57% higher than two years ago.

As expected, net sales growth in the quarter was impacted by higher returns rates year-on-year due to the product mix, which was expected to continue in the first half of the 2023 financial year.

In the UK, the group said it was continuing to deliver a "strong" trading performance, while internationally, performance was still being impacted by longer customer delivery times as a result of pandemic-related supply chain pressures.

However, in the fourth quarter the group saw a return to growth in the rest-of-world geography, due to the positive contribution from wholesale.

Boohoo said it expected, subject to audit, to report adjusted EBITDA for the financial year ended 28 February of £125m, in line with its December guidance and market expectations.

"The group has delivered strong growth over the last two years, which has translated into significant market share gains," said chief executive officer John Lyttle.

"We are confident that pandemic-related headwinds are short-term in their nature, and our focus is to ensure the business is well positioned for growth as these headwinds ease."

Matt Britzman, equity analyst at Hargreaves Lansdown, said the market was showing a "very positive reaction" to what appeared to be an update stating how guidance would be hit, which he put down to the level of uncertainty surrounding Boohoo.

"Back in December guidance was lowered by a pretty decent chunk, with the group pointing to everything from higher freight costs to Omicron concerns.

"Rebasing guidance is rarely a good thing, but the positives from this update are that they look to have stabilised which will help instil more confidence from markets.

"That's not to say the challenges are gone - far from it."

Britzman noted that international customers were still having to wait longer to receive their orders, hurting demand.

Higher returns across the board were also hurting the company's net sales figure - a headwind not expected to fall away until the second half of the new financial year.

"Management expects these challenges to be short lived, which seems reasonable.

"But Boohoo has some work to do if it wants to regain investors' trust.

"The completion of the 'agenda for change', which was put in place to address issues with worker pay and wider conditions within supply chains, is a step in the right direction."

At 0950 GMT, shares in Boohoo Group were up 16.73% at 92.08p.

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