Today, the often-overlooked investment opotunity of fashion retail is the focus of today's investment, with a breakdown of Boohoo Group which trades on the London Stock Exchange. Let’s dig into it!
Overview
- Boohoo Group is an online fashion company.
- The company designs, sources, markets, and sells clothing, shoes, accessories, and beauty products.
- It owns the brands boohoo, PrettyLittleThing (PLT), Nasty Gal, MissPap, Karen Millen, Oasis, Warehouse, and Coast.
Growth
- Over the past 3 years, Boohoo Group has grown top-line revenue ~40% every year.
- In its latest quarter (ended May 31) it continued strong growth of 32% YoY.
- 56.5% of Q1 revenues were generated in the UK. 27% in the US.
Guidance
- For the year ending Feb 28, 2022, Boohoo Group is guiding to 25% revenue growth and adjusted EBITDA margins around 9.5% – 10%.
- Medium-term guidance for 25% sales growth per annum and 10% adjusted EBITDA margin remains unchanged.
Valuation
- At £279.00, $BOO trades around a £3.25 billion EV.
- If we assume the mid-point of guidance from Boohoo for FY22, the stock is trading around 15x 2022 EBITDA.
- I don’t love investing in clothing retail businesses personal as a mid-long term investor is exposed to too much risk because they are typically low margin and heavily dependent on trends, maybe exploding LVHM, but the valuation looks alright if it continues to grow ~25% YoY. So far management has managed to grow top-line rapidly since IPO.
- Overall the business looks interesting as a investment option if you were set of retail exposure however this is not screaming out to me as undervalued to aim for a longer term play without warranting a deeper dive.
