Response to share price

boohoo group plc

("boohoo" or "the Group")

Response to share price

boohoo (AIM: BOO), a leading online fashion group, notes the recent decline in its share price which the Group understands is in response to a short-selling note issued on 26^th May that contains allegations of disclosing information that could be deemed to be misleading.

The Group strongly refutes the allegations made in the research note, and would highlight the following to investors:

Definition of Free cash flow

Free cash flow is disclosed within page 9 of the Group's most recent annual results published on 22 April 2020, and contains clear definitions, alongside a full reconciliation down to net cash flow for the financial year, including items such as tax paid and dividends paid to minority shareholders.

International accounting standards require the Group to fully consolidate its cash flows, and its treatment of this with respect to its subsidiary, PrettyLittleThing ("PLT") reflects this conformance with accounting standards.

PLT profitability

The Group strongly refutes any allegations of understating costs incurred by PLT, thereby overstating its profitability. All inter-company transactions are conducted on an arms' length basis. The Group operates a multi-brand strategy with the profitability of its more established brands such as boohoo and PLT being significantly ahead of the Group's adjusted EBITDA margin of 10.2%; with that higher margin being reinvested into new opportunities and brands that the Group has started or acquired in recent years such as boohooMAN, Nasty Gal, MissPap, Karen Millen and Coast.

PLT option

As disclosed at the time of the acquisition of the majority of PLT, and in the latest annual report and accounts, the Group has the option to acquire the remaining 34% minority shareholding in PLT, with the terms of the option coming into being on 28 February 2022. Under the terms of the agreement, it was agreed that an independent big-four accountancy firm would undertake a valuation exercise to determine the market value for PLT, after which a minority discount may be applied of up to 30%.

Treatment of non-controlling interest

In note 1 of the Group's latest Full Year Results Announcement, "Accounting Policies", the Group highlighted a change in accounting treatment with regards to the non-controlling interest, following on from a review of the agreement with its auditors, extract below:

"Following a review of the accounting treatment of the non-controlling interest of shareholders in PrettyLittleThing.com Limited ("PLT"), it has been determined that the restrictions imposed by the Shareholders' Agreement require the proportion of the non-controlling interests' share of the profits of PLT to accrue in accordance with certain terms of the agreement and not as 34% as previously stated. The accumulated profit attributable to non-controlling interests of £8,761,000 as at 28 February 2018 has been adjusted to £4,018,000 and the share of profits for the year to 28 February 2019 from £9,687,000 to £3,875,000 and the difference added to retained earnings. The share of profits recognised by the non-controlling interest increases each year by 20% of 34% of the earnings of PLT from 20% of 34% to 100% of 34% over the five-year period of the agreement, as does the non-controlling interests' share of the net assets."

Whilst the Group has recognised the minority interest in this manner at a statutory level, for adjusted earnings per share, the Group has deemed it appropriate to recognise the full 100% of the 34% of PLT's adjusted profit after tax to allow its shareholders and readers of the accounts to fully understand PLT's underlying profitability. To not do so would risk over-stating the Group's current adjusted earnings per share, and understate the minority shareholders' likely future interest in the after-tax profits of PLT.

Share placing

The Group's recent share placing, raised gross proceeds of £197.7m. As previously stated, the Group intends to use the net proceeds of the Placing to take advantage of numerous opportunities that are likely to emerge in the global fashion industry over the coming months, particularly following the disruption caused by the onset of COVID-19. The Group continues to review a number of possible M&A opportunities and will update shareholders as required.

I Saw It First

I Saw It First is an online fashion business, based in the UK, set up by Jalal Kamani in 2016, having previously worked at boohoo group. Jalal Kamani retains a small holding in boohoo group plc (0.65%). The business is an unrelated entity to boohoo group and is a smaller competitor in a highly fragmented marketplace.

Notice of trading update

The Group will provide an update for the three month trading period to May 31st 2020 on June 17^th 2020.

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About boohoo group plc

"Leading the fashion eCommerce market"

Founded in Manchester in 2006, boohoo is an inclusive and innovative brand targeting young, value-orientated customers. Since 2006, boohoo has been pushing boundaries to bring its customers up-to-date and inspirational fashion, 24/7. boohoo has grown rapidly in the UK and internationally, expanding its offering with range extensions into menswear, through boohooMAN.

In early 2017 the group extended its customer offering through the acquisitions of the vibrant fashion brand PrettyLittleThing, and free-thinking brand Nasty Gal. In March 2019 the group acquired the MissPap brand and in August 2019, the Karen Millen and Coast brands, all complementary to the group's scalable multi-brand platform. United by a shared customer value proposition, our brands design, source, market and sell great quality clothes, shoes and accessories at unbeatable prices. These investment propositions have helped us grow from a single brand, into a major multi-brand online retailer, leading the fashion eCommerce market for 16 to 40-year-olds around the world. As at 29 February 2020, the boohoo group had around 14 million active customers across all its brands around the world.