08 May 2024

boohoo group plc

Fashion first, future focused, online apparel leader

Results for the 12 months ended 29 February 2024

FY24 results in line with market expectations, against challenging market backdrop

Investment cycle complete - well positioned to drive future profitable growth

Notes: 

(1) GMV is all merchandise sold to customers after cancellations and returns, including VAT, carriage receipts and premier subscription income

(2) Net (debt)/cash is cash less borrowings, excluding lease liabilities. 

(3) Adjusted measures, which are not statutory measures, show the underlying performance of the group excluding large, non-cash and exceptional items (see note 1). 

(4) Adjusted EBITDA is calculated as loss before tax, interest, depreciation, amortisation, share-based payment charges and exceptional items.  

(5) Adjusted EBIT is calculated as loss before tax, interest, amortisation of acquired intangible assets, share-based payment charges and exceptional items. 

(6) Adjusted loss before tax is calculated as loss before tax, excluding amortisation of acquired intangible assets, share-based payment charges and exceptional items. 

(7) Adjusted loss per share is calculated as diluted earnings per share, adding back amortisation of acquired intangible assets, share-based payment charges and exceptional items.  

(8) Operating costs is defined as Distribution & Administrative Costs excluding depreciation, amortisation, exceptional items & share based payments

Financial highlights 

·    GMV down 13% vs FY23 to £1,809 million as group performance continued to be impacted by a difficult macro-economic environment. Positive trend in the performance of Core Brands (boohoo, boohooMAN, PrettyLittleThing, Karen Millen, Debenhams External Marketplace), with decline slowing from (9%) in H124 to (4%) in H224, showing a clear improvement in trajectory

·    Revenue of £1,461 million, down 17% vs FY23 reflecting our increased focus on profitability and difficult market conditions. Revenue growth was also impacted by the growth of marketplace with its commission-only revenue model

·    Gross margin was 51.8%, up 120bps vs FY23, reflecting growth of marketplace, the impact of our cost savings programme and freight and raw material price decreases

·    Operating costs of £699 million, down 16% vs FY23 driven by the actions taken under the ongoing cost savings programme  

·    Adjusted EBITDA margin improved to 4.0%, up 40bps vs FY23, reflecting improvements in gross margin, cost reduction initiatives and value unlocked from automation investment. Adjusted EBITDA of £58.7 million, down 7% vs FY23

·    Inventory has increased by £29.9 million vs FY23, largely driven by the investment in stock levels to support the opening of the US Distribution centre 

·    £64.8 million capital expenditure invested in infrastructure for future growth, including the Sheffield automation project and the US distribution centre both of which were delivered on time and on budget

·    Net Debt of £(95.0) million an increase of £(100.9)m, driven by our investments in US inventory and capital expenditure

·    Robust balance sheet with £123.7 million of land and buildings, £200.3 million of fixtures and fittings, £208.0 million of inventory and £29.9 million investment in Revolution Beauty

Operational highlights

·    Clear brand strategy with an increased focus on our 5 core brands (boohoo, boohooMAN, PLT, Karen Millen and Debenhams) which generate demand across a diverse, global customer base

·    Strong growth of Debenhams marketplace; capital-light, stockless model driving high margin growth and expanding our customer proposition with more than 3,500 brands onboarded, offering exceptional choice across fashion, beauty, and home 

·    Strategy to improve profitability across our non-core labels by transitioning them to the Debenhams marketplace showing results with improved performance in H224

·    Successful completion of two major capex projects:

o  Sheffield automation, delivering enhanced efficiency and capacity

o  US distribution centre, upgrading our proposition with next day and express delivery options in a large, strategic market 

·    Leadership team strengthened with appointment of Stephen Morana as CFO in February 2024

Outlook & Guidance

·    In FY24, we took significant steps to reposition the group for sustainable, profitable growth

·    We are targeting GMV growth, as well as continued improvements in adjusted EBITDA margin

·    We remain confident in 6-8% medium term EBITDA margin target

·    In FY25, we will continue to leverage the increasing efficiencies generated by our investment in automation and capacity with an ongoing focus on cost reduction. We remain on track to deliver annualised cost savings of £125 million across cost of goods, supply chain and overheads in FY25

·    Significant capital expenditure reduction expected in FY25 with investment cycle now complete

·    The Group expects to generate positive free cash flow in FY25

John Lyttle, Group CEO, commented:

"We have a highly loyal customer base and throughout the year we remained focused on maintaining our position as an industry leading, fashion-forward group with brands that deliver on-trend, high quality fashion at great value prices. The strength and diversity across our core brands means the Group is well placed to serve a global customer base across fashion, beauty and home.

Despite difficult market conditions, caused by high levels of inflation and weakened consumer demand, we made continued progress in the year. I am particularly encouraged with the ongoing trend of improved performance in our core brands which saw GMV down 9% in H124 and down just 4% in H224 demonstrating increasing momentum and validating our strategy to focus on these brands which are much loved by our customer base.

We continue to take actions to deliver on our goal of bringing the entire group back to profitable growth. In FY24, we completed our investment cycle with the launch of our US distribution centre and the successful delivery of our Sheffield Automation project. Sheffield is already delivering significant efficiency improvements, which, together with the traction of Debenhams marketplace, is generating margin improvement across the group. We have also taken steps to transition several of our labels over onto Debenhams marketplace to drive enhanced profitability. This proved effective during the year and is something that will drive additional profitability going forward. These factors, combined with improving market conditions, give us strong confidence in our medium-term outlook.

The group is now well positioned to return to growth, and we are focused on ensuring that growth is both sustainable and profitable. We will host a capital markets day in due course to provide more detail on our strategy, key growth drivers and the longer-term outlook for the Group".

Investor and analyst meeting

A webcast for analysts & investors will be held at 9am (UK time) today. Following the presentation, there will be a live Q&A session. The webcast is available via the following link:  https://brrmedia.news/BOO_PR24

A recording will be made available on the boohoo investor relations website after the webcast here: www.boohooplc.com/investors.htm

About boohoo group plc

"Leading the fashion eCommerce market"

Founded in Manchester in 2006, boohoo group is a fashion forward, inclusive and innovative business. The Group's brands are complementary, vibrant and scalable, delivering inspirational, on-trend fashion to our customers 24/7. The diversity of our brands, including the group's 5 core brands, boohoo, boohooMAN, PrettyLittleThing, Karen Millen and Debenhams, enable us to serve a broad customer base, globally, with a primary focus on the UK and US markets. Since its acquisition in 2021, Debenhams has been transformed from a retailer into a digital marketplace with a capital-light, low-risk operating model and a focus on fashion, beauty as well as home. Boohoo group is concentrated on driving sustainable, profitable growth with technology and automation increasing efficiency across the business.

Cautionary Statement

Certain statements included or incorporated by reference within this announcement may constitute "forward-looking statements" in respect of the group's operations, performance, prospects and/or financial condition. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words and words of similar meaning as "anticipates", "aims", "due", "could", "may", "will", "should", "expects", "believes", "intends", "plans", "potential", "targets", "goal" or "estimates". By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions and actual results or events may differ materially from those expressed or implied by those statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. No responsibility or obligation is accepted to update or revise any forward-looking statement resulting from new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast. This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares or other securities in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares or other securities of the Company. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser. Statements in this announcement reflect the knowledge and information available at the time of its preparation. Liability arising from anything in this announcement shall be governed by English law. Nothing in this announcement shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.

Review of the business

Performance during the year

Overview

Notes:

(1) GMV is a non-statutory measure, defined as: All merchandise sold to customers after cancellations and returns, including VAT, carriage receipts and premier subscription income.

(2) Adjusted measures, which are not statutory measures, show the underlying performance of the group, excluding large, non-cash and exceptional items (see note 1).

(3) Adjusted EBITDA is calculated as loss before tax, interest, depreciation, amortisation, share-based payment charges and exceptional items.

(4) Adjusted EBIT is calculated as loss before tax, interest, amortisation of acquired intangible assets, share-based payment charges and exceptional items.

(5) Adjusted loss before tax is calculated as loss before tax, excluding amortisation of acquired intangible assets, share-based payment charges and exceptional items.

(6) Adjusted loss per share is calculated as loss per share, adding back amortisation of acquired intangible assets, share-based payment charges and exceptional items.

(7) Net cash is cash less borrowings, excluding lease liabilities.

Group overview

GMV was down 13% vs FY23 to £1,808.9 million from £2,086.2 million as group performance continued to be impacted by a difficult macro-economic environment. We saw a positive trend in the performance of Core Brands (boohoo, boohooMAN, PrettyLittleThing, Karen Millen, Debenhams External Marketplace), with decline slowing from (9%) in H124 to (4%) in H224. Strong GMV growth was also achieved within the Debenhams marketplace, a capital-light, stockless model, targeting the UK customer, which has driven high margin growth and expanded our customer proposition during the year, with over 3,500 brands onboarded.

Group revenues for the period declined by 17% (17% Constant Exchange Rate = "CER") to £1,461.0 million from £1,768.7 million in 2023. UK revenues declined 16% reflecting the impact of the macro environment on consumer demand, as well as price investments and the previously mentioned increase of the Debenhams marketplace within the sales mix. International revenues declined 20%, with extended delivery times continuing to impact our customer proposition for most of the period and annualisation against strong wholesale comparatives. The group's US distribution centre went live in August with its first brand, PrettyLittleThing, on time and on budget, as part of a phased roll-out of brands into the site. This has transformed the delivery proposition for customers in a key strategic market, and for brands that are operationally live, delivery times have improved by 3 days on average since launch.

The group's core brands, defined as boohoo, boohooMAN, PrettyLittleThing, Karen Millen and Debenhams External Marketplace accounted for 6 percentage points of the group's total revenue decline. The growth of Marketplace resulted in an additional negative 4 percentage points impact on revenue. Marketplace has a commission only revenue model, where for own brand sales the full value of the products sold is recognised as revenue. Labels accounted for 8 percentage points of the group's total revenue decline, following proactive actions taken to target more profitable sales by transitioning them over to the Debenhams marketplace.

Gross margin was 51.8%, up 120bps on the prior period (2023: 50.6%). Adjusted EBITDA was £58.6 million (2023: £63.3 million), a decrease of 7%. Adjusted EBITDA margin was 4.0%, up 40bps on the prior period (2023: 3.6%). Loss before tax was £159.9 million (2023: £90.7 million). Loss per share was 11.48p (2023: 6.13ps). Adjusted loss per share was 2.86p (2023: 0.02p).

The improvement in Adjusted EBITDA margin reflected strong improvements seen across gross margins and distribution costs, which improved by 120bps and 60bps respectively year on year. The improvement in gross margin reflected tighter inventory management and normalisation of freight and other logistics costs. Distribution cost savings were driven by significant efficiencies that have been unlocked from the successful automation of our Sheffield distribution centre and from the rationalisation of the UK warehousing profile following the closure of the group's Daventry site in January.

Other administrative costs reduced by 20% year on year and 50bps as a percentage of net sales, reflective of the action taken as part of the group's cost reduction programme. Marketing costs reduced by 3% as spend was optimised across marketing channels but increased by 190bps as a percentage of sales. This reflects the impact of the macro environment on consumer demand, targeted investments in specific growth opportunities as well as underlying inflationary pressures across digital marketing channels. This will be assessed going forwards through optimisation of marketing channels to drive performance as well as brand activation campaigns to drive higher levels of organic and direct traffic.

During the year, the group incurred significant non-recurring costs, which are shown as exceptional items in the financial statements and have not been included in the adjusted performance measures. These items relate to restructuring costs and impairment of assets associated with the closure of the Daventry warehousing facility, set up costs associated with the opening of a warehousing facility in the USA, impairment of the group's acquired intangible assets, dual technology platform running costs associated with the re-platforming of the group's e-commerce front end to its own in-house developed tech stacks, and redundancy costs associated with the group's cost reduction programme. Additional exceptional costs associated with the restructuring of the UK warehousing facilities and dual technology platform running costs are expected to be incurred in the next financial year. These exceptional items amounted to £103.0 million and are detailed in note 1 of the financial statements.

During the year the group recognised a £10.2m gain within other reserves on transition of its investment in Revolution Beauty plc, which was previously accounted for as a financial asset at fair value through other comprehensive income, as irrevocably designated at the time of investment, in accordance with IFRS 9, and is now classified as an investment in associate in accordance with IAS 28.

In accordance with the acquisition agreement entered into with the non-controlling interests of PrettyLittleThing.com Limited (announced on 28 May 2020), 16,112,331 Ordinary Shares in boohoo group plc were to be issued subject to the group's share price averaging 491 pence per share over a six-month period, up until a longstop date of 14 March 2024. If this was not met, the consideration was to lapse.

As at 29 February 2024 the issuing condition had not been met and could not have been met before the longstop date of 14 March 2024. As a result, the shares to be issued have been derecognised and recycled through other reserves alongside the reserves created upon acquisition of the non-controlling interest in PrettyLittleThing.com Limited.

While trading conditions have remained challenging due to cost inflation, uncertain consumer demand and normalisation of the channel shift online, the group has a strong business model and clear strategy which it is focussed on executing to unlock market share. This will allow it to build on its existing strengths of:

·      Test and repeat sourcing model that allows our brands to utilise our diverse sourcing base with agility and flexibility whilst minimising excess inventory risk

·      Attractive brand portfolio that combines the latest trends with outstanding value for consumers

·      16 million unique active customers

·      A broad target addressable market of up to 500 million potential customers in key global markets

·      Well-invested infrastructure that offers best-in-class, efficient logistics and a strong customer proposition with our first international distribution centre now live, and significant capacity for future growth

·      Strong balance sheet with significant liquidity headroom

·      Numerous growth opportunities through our brand's direct-to-consumer proposition, Debenhams and other routes to market, including strategic partnerships with select partners globally

Key performance indicators

Active customer numbers in the last 12 months decreased by 11% to 16 million whilst the conversion rate to sale increased slightly by 80bps to 3.82% from 3.74%. Average order value decreased by 3% to £51.68 and the number of items per basket decreased slightly from 2.82 to 2.80. Average order frequency decreased by 9% from 3.08 times to 2.79 times per annum, reflecting the impact of the macro environment on consumer demand.

Cash and working capital management

Operating cash inflow was £0.1 million (2023: £130.9 million inflow). The value of inventory held has increased year on year by £29.9 million, in part due to the opening of the warehousing facility in the USA.

Capital expenditure of £64.8 million included investment in property and distribution centres of £26.9 million, mainly around the opening of the warehousing facility in the USA. Net cash outflow was £100.9 million (2023: £229.6 million inflow). Net debt at the year-end increased to £95.0 million (2023: £5.9 million net cash), with total liquidity of £230.0 million.

During the prior year the group secured a new £325 million rolling capital facility, increasing from the previous £100 million facility. The facility remains fully drawn at the end of February 2024.

The group will continue to make selective investments to support its platform and brands, in line with its internal investment criteria and in a manner that reflects the current macro-economic environment.

Performance by market

UK

The UK market continues to be the largest for the group, accounting for 63% of revenue (2023: 62%). Revenue was £921.5 million declining by 16% on 2023 reflecting the impact of the macro environment on consumer demand, as well as price investments and the increase of the Debenhams Marketplace within the sales mix. Gross margin improved from 47.9% to 50.0% and return rates have reduced slightly, which is attributable to product mix, the capturing of deflation in our supply chain and pass-through of lower prices to our consumers.

USA

USA revenues declined 18% on the prior year. Delivery times to the USA for most of the period remained elevated compared to pre-pandemic levels, and this has undoubtedly impacted demand. Successful go-live of the group's US distribution centre on time and on budget in August has transformed the delivery proposition for US customers, and there will be a phased roll-out of brands operating in the facility over time. Return rates have decreased year on year reflecting brand mix. Gross margin reduced from 58.0% to 55.9% reflecting brand mix as well as the impact of duties associated with the new distribution centre.

Rest of Europe

Revenue in the rest of Europe decreased by 20% year on year to £165.8 million (2023: £206.5 million), with performance impacted by annualisation against strong wholesale comparatives. Gross margin improved slightly from 52.0% to 52.7% and return rates decreased year on year.

Rest of world

Revenue in the rest of the world decreased by 30% on the prior year to £74.6 million (2023: £107.0 million). Gross margin improved from 50.7% to 54.8% with return rates decreased year on year.

Financial review

Revenue by geographical market

KPIs

(1) Defined as having shopped in the last 12 months on the website and app, including marketplace.

(2) Defined as number of website and app orders in last 12 months divided by number of active customers.

(3) Defined as the percentage of website and app orders taken to internet sessions.

(4) Calculated as gross sales including sales tax divided by the number of orders.

Consolidated income statement

GMV was down 13% vs FY23 to £1,808.9 million from £2,086.2 million and group revenue for the year declined by 17% (17% CER) when compared to the previous year at £1,461.0 million (2023: £1,768.7 million), reflecting the impact of the macro environment on consumer demand.

Adjusted EBITDA, which is not a statutory measure, represents earnings before interest, tax, depreciation, amortisation, non-cash share-based payments charges and exceptional items. It provides a useful measure of the underlying profitability of the business. Adjusted EBITDA decreased by 7% from £63.3 million to £58.6 million and Adjusted EBITDA margin increased from 3.6% to 4.0%, reflecting strong improvements seen across gross margins and distribution costs, which improved by 120bps and 60bps respectively year on year.

Operating costs, comprising distribution costs and administrative expenses, excluding depreciation and amortisation, have increased by 80bps to 47.8% of revenue. Other administrative costs reduced by 20% year on year and 50bps as a percentage of net sales, reflective of the action taken as part of the group's cost reduction programme. Marketing costs reduced by 3% as spend was optimised across marketing channels but increased by 190bps as a percentage of sales. This reflects the impact of the macro environment on consumer demand, targeted investments in specific growth opportunities as well as underlying inflationary pressures across digital marketing channels.

Adjusted profit / (loss) after tax, as with Adjusted EBITDA, provides another more consistent measure of the underlying profitability of the business by removing non-cash amortisation of intangible assets relating to the acquisition of new brands (being their trademarks and customer lists), share-based payment charges and exceptional items.

The group recognised a total expense of £17.5 million during the year (2023: £32.0 million) relating to equity-settled share-based payment transactions.

Exceptional items amounted to £103.0 million and are shown in more detail in note 1 of the financial statements. These items relate to restructuring costs and impairment of assets associated with the closure of the Daventry warehousing facility, set up costs associated with the opening of a warehousing facility in the USA, impairment of the group's acquired intangible assets, dual technology platform running costs associated with the re-platforming of the group's e-commerce front end to its own in-house developed tech stacks, and redundancy costs associated with the group's cost reduction programme. Additional exceptional costs associated with the restructuring of the UK warehousing facilities and dual technology platform running costs are expected to be incurred in the next financial year. 

A tax credit of £19.0m has been recognised, which represents an effective rate of tax for the year of 11.9% (2023: 16.6%). This is lower than the tax credit calculated when multiplying the loss before tax at the blended UK statutory rate of tax for the year of 24.5% (2023: 19.0%), due to expenditure not deductible for tax purposes, being principally depreciation on buildings and fit-out, disallowable legal claims and share-based payment charges on growth shares.

Consolidated statement of financial position

There has been a substantial investment in property and distribution centres to facilitate our next phase of growth. Balance sheet strength is maintained with £134.6 million of unencumbered freehold assets. The value of inventory held has increased year on year by £29.9 million as a result of the opening of the warehousing facility in the USA, necessitating the maintenance of adequate inventory levels across multiple territories.

During the period, the group incurred significant non-recurring costs, which are shown as exceptional items in the financial statements and have not been included in the adjusted performance measures. These items include impairment of assets associated with the closure of the Daventry warehousing facility and impairment of the group's acquired intangible assets.

During the year ended 28 February 2023 26.47% of the issued share capital of Revolution Beauty Group plc ("REVB") was acquired. The equity accounting requirements of IAS 28 (Investments in associates and joint ventures) were considered, and it was determined that significant influence did not exist either at the time of initial recognition or as at 28 February 2023. The equity investment was accounted for as a financial asset under IFRS 9 with the option taken to hold at fair value through other comprehensive income, as irrevocably designated at the date of recognition.

On 18 July 2023 the group entered into a settlement agreement with REVB regarding the reconstitution of the REVB board. The group also increased its shareholding in REVB to 27.13%. The equity accounting requirements of IAS 28 were reconsidered, and it was determined that significant influence did exist as a result of the settlement agreement, access to accounting records and reconstitution of the REVB board (including the appointment of Neil Catto, former group CFO and NED, and Alistair McGeorge, who remains a NED on the group's board). As a result the investment has been accounted for as an associate under IAS 28 from 18 July 2023. The investment, which was previously accounted for under IFRS 9, was derecognised and the cumulative gain recognised in other comprehensive income of £10.2m was reclassified to other reserves as a revaluation adjustment in line with IFRS 9 and the group's accounting policy.

Under the equity accounting requirements of IAS 28 the group's share of the results of associate for the period from 18 July 2023 to 29 February 2024 is included in the carrying value of the associate in the group statement of financial position and included within the group income statement using the equity method of accounting.

Intangible and fixed-asset additions

Liquidity and financial resources

Operating cash inflow was £0.1 million compared to an inflow of £130.9 million in the previous year and free cash outflow after tax was £63.0 million compared to an inflow of £30.7 million in the previous financial year. Capital expenditure and intangible asset purchases were £64.8 million, which includes a £26.9 million investment in our distribution centres to support future growth. The value of inventory held has increased year on year by £29.9 million as a result of the opening of the warehousing facility in the USA, necessitating the maintenance of adequate inventory levels across multiple territories. The closing cash balance for the group was £230.0 million and the net debt balance £95.0 million.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 29 February 2024

1.     See note 1, exceptional items.

2.     2024 and 2023 total is the IFRS-compliant measure for the consolidated statement of comprehensive income.

3.     Net fair value gains on cash flow hedges will be reclassified to profit or loss during the two years to 28 February 2026.