boohoo expects revenue growth to slow down as trading normalises after pandemic

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boohoo Group PLC (LON:BOO) said it expects revenue to jump 25% in the year to February 2022 as trading normalises following an exceptional year.

In fact, revenue in the year to 28 February 2021 climbed 41% to £1.7bn as people turned to online shopping while shops were closed during lockdowns.

READ: boohoo buys Soho office for £72mln

Looking ahead, the AIM-listed retailer said this trend is set to wind down and also noted that carriage and freight costs will remain high.

Trading in the first few weeks of the financial year has been encouraging though the economic outlook remains uncertain, it added.

Core categories that saw significant declines, such as dresses and going out, are now forecast to recover as economies reopen.

Adjusted underlying earnings (EBITDA) will be weighted towards the second half of the year, reflecting a strong comparative period in the first half.

In the year to February 2021, adjusted EBITDA advanced 37% to £173mln with adjusted EBITDA margin of 10%.

The acquisitions of Debenhams, Dorothy Perkins, Wallis and Burton are forecast to deliver 5% revenue growth in the current financial year, though they will dilute adjusted EBITDA margin which is expected to be 9.5-10%.

“While the continued strong financial performance suggests a ‘buy’ rating, we remain cautious given the scale of the ESG challenges facing the group, the possibility of follow-up investigations and potential financial impact from an ethical supply chain though the company guidance dismisses this,” analysts at Liberum commented.

“We therefore rate boohoo group ‘hold’. If Boohoo can adequately deal with its ESG issues, there remains significant upside to the share price. Greater clarity on ESG issues and that there will not be any future financial impact from implementing an ethical sourcing and supply chain model or penalties for past breaches; is required for us to return to ‘buy’.”

Shares shed 3% to 317.3p on Wednesday morning.

–Adds analyst comment, shares–

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