Boohoo profit soars during pandemic despite factory scandal
Boohoo saw profit rocket more than 50 per cent during the pandemic, as the fast fashion retailer shrugged off a factory scandal earlier in the year that threatened to alienate its customer base.
The results
Revenue for the six months to the end of August rose 45 per cent to £816.5m, up from £564.9m in the same period last year. The brand saw strong growth around the world, including a whopping 83 per cent revenue hike in the US.
Profit before tax swelled 51 per cent to £68.1m year-on-year, up from £45.2m in 2019.
Boohoo appeased inventors with diluted earnings per share of 3.99p, up 43 per cent compared to the same period last year.
The group said it now has a robust balance sheet with net cash of £344.9m to weather the future fallout of the pandemic, with healthy operating cash flow of £147.2m and net cash flow of £99.5m — up from £15.5m in 2019.
Boohoo withheld from paying an interim dividend, but said it continues to have a “highly positive outlook for online fashion globally”.
The retailer boosted its group revenue growth outlook for the year to 28 February 2021 to 28 per cent to 32 per cent, up from the 25 per cent estimate previously guided.
Why it’s interesting
Boohoo’s strong half-year results will come as welcome news to investors after allegations surrounding the fashion retailer’s warehouse operations in Leicester drew furious backlash from MPs and industry figures.
Ministers slammed Boohoo’s “inadequate” response to a Sunday Times investigation which revealed workers at Leicester’s Jaswal Fashions factory, which makes clothes for Boohoo’s Nasty Gal brand, were paid as little as £3.50 an hour.
An independent report into the allegations by Alison Levitt QC published last week found that Boohoo knew of “endemic” problems at its Leicester suppliers, but did “too little too late” to remedy them.
The fashion brand accepted the review’s recommendations for change in full and apologised for failing to “match up to the high expectations we set for ourselves”.
Chief executive John Lyttle today said the retailer was “constantly exploring ways to accelerate our sustainability journey”, after Boohoo last month announced it will open a model garment factory in Leicester.
Despite the scandal, Boohoo enjoyed roaring success during the pandemic after it cashed in on a major shift to online shopping across the globe.
While UK sales grew 37 per cent in the six months to the end of August, Boohoo now has its sights set on expansion further afield, after its international sales made up 47 per cent of revenue during the period.
Boohoo’s active customer base swelled more than a third to 17.4m in the past year, with an exceptional increase in new customer acquisition during lockdown.
Richard Hunter, head of markets at Interactive Investor, said: “The furore surrounding the company’s Leicester supply chain in July around pay and working conditions has done little to harm Boohoo’s profits or prospects.
“Any reputational damage caused by the [factory] allegations has not filtered through to a very strong set of numbers.”
What Boohoo said
John Lyttle, chief executive of Boohoo, said:
“We continue to maintain a highly positive outlook for online fashion globally and for our platform of brands. The group’s multi-brand approach appeals to a widening consumer audience. The demand for affordable online fashion continues unabated and provides the opportunity for continued growth globally. Growth in the UK, our largest market, remains strong, whilst international growth continues at a higher rate.
“International expansion will continue as we add more country-specific websites, refine our customer proposition and raise brand awareness through marketing and social media. Our scalable, multi-brand platform provides the basis for expansion of the group through strategic acquisitions. We are also committed to continuing to drive improvements across our environmental responsibilities and are constantly exploring ways to accelerate our sustainability journey.”