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boohoo has acquired Debenhams’ website and brand for a cash amount of £55m. This will be paid for using boohoo’s available cash balance, which stood at £386.9m at the end of 2020. The deal does not include Debenhams’ stores, stock or financial services. Debenhams is expected to be relaunched on boohoo’s platform in the first quarter of 2022.
boohoo highlighted that acquiring Debenhams’ assets will allow it to enter the beauty, sports and homeware market. The group also believes the deal will help “develop the platform for international markets”, and is in line with ambitions to “create the UK’s largest marketplace”.
In Debenhams’ most recent financial year, its online business generated unaudited online net revenues of around £400m.
The shares rose 4.3% following the announcement.
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Third quarter trading details 14 Jan 2021 (figures are given at constant currency)
Group revenue rose 40% in the four months to 31 December, to £660.8m. That reflects double digit growth in all regions, with the UK and US the best performers.
Sales growth guidance for the full year has been upgraded to 36% – 38%, up from 28% – 32%.
The Rt. Hon. Sir Brian Leveson’s initial report to the board is now available on boohoo’s plc website. The high court judge was appointed in November, to provide independent oversight of boohoo’s Agenda for Change programme, following the supply chain and working conditions scandal.
Sales rose 40% to £357.2m in the UK. The group is close to finishing the extension of its warehousing capacity, and the new site is due to open in April 2021. It will be used by the Nasty Gal, Karen Millen, Coast, Oasis and Warehouse brands.
Acquired brands, Warehouse and Oasis have now been integrated into boohoo’s platform.
The USA recorded a 51% increase in sales, reaching £167.7m. Europe (ex UK) was up 32% at £90.4m, while the Rest of World climbed a more modest 24%, with revenue of £45.5m.
The group expects a “small cost headwind” from higher distribution and admin costs because of Brexit.
Gross margins dipped 50 basis points, and now stand at 53%. Boohoo has net cash of £386.9m, compared to £344.9m at the end of August.
Medium-term guidance remains for 25% sales growth per annum and a 10% underlying cash profit (EBITDA) margin.
Boohoo provided an update on its Agenda for Change programme, which includes (but is not limited to):
- “Significant” investments in internal Responsible Sourcing, Compliance and Sustainability teams
- Appointing KPMG as consultants to advise and monitor the implementation of the Agenda for Change programme
- Expanding the number of Independent Non-Executive Directors
- The removal of 64 suppliers, and ongoing investigations
- The group intends to publish all UK tier one and two suppliers by the end of March, with the names of all global suppliers expected at the end of September
Sir Leveson said there is still work to do, and implementing broad change won’t be straightforward. However, he acknowledged that “boohoo has enthusiastically started the journey and is travelling along the right road”.
boohoo key facts
- Price/Earnings ratio: 32.7
- Average Price/Earnings ratio since listing (2014): 42.1
- Prospective yield: 0%
All figures are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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