Hello, and welcome to the Boohoo Group PLC trading update. Throughout the call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. Just to remind you, this conference call is being recorded. Today, I'm pleased to present John Lyttle, Chief Executive Officer. Please go ahead with the meeting.
Thank you, operator, and good morning, everyone. Thank you for taking the time to join us this morning for our peak trading update call. I'm joined by Carol, Mahmud, and Neil. I'm going to take you through our update, and after that, we'll open up the call to Q&A. Onto the results. We feel that these demonstrate yet another great trading performance for the group, with sales up 44% for the four months to December thirty-first. We're delighted with the headway and market share gains that we're seeing in all of our markets, which is exactly what our platform of brands are focused on delivering. In the U.K., sales grew 42%, with growth accelerating from what we saw in the first half. We believe this to be well ahead of the wider market, especially when we look at what has been reported recently.nnn
Our international markets took another great step forward, with sales up 47%, accounting for 46% of group revenues in the quarter. By region, Europe grew 57%, U.S., 57%, and rest of the world, 13%. On to our brands. Boohoo delivered another period of strong growth, with sales of GBP 233 million, up 42% and gross margins down 20 basis points. Retail again delivered an exceptionally strong trading performance, and this is across both our womenswear and menswear brands, reflective of our strong customer offer and competitive proposition. At PLT, we're continuing to see great levels of growth. Sales come in at GBP 191 million, up 32%. Gross margins of 55.1%, are down 130 basis points year-on-year.
But it is worth noting that this performance is in line with our plans and consistent with what PLT delivered in the first half. Nasty Gal's performance remains very strong, with total sales of GBP 41.5 million in the period, up 102%. Its gross margin of 54.3% was down 10 basis points, having now annualized a series of price investments made in the previous year. We're really pleased that its growth remains strong in its home market of the U.S., and it's continued to build on the great progress that has been made in the last two years in the U.K. And for our emerging brands, Coast, Karen Millen, and Miss Pap, we've really been quite busy in the last few months.
In early September, we integrated MissPap onto our platform, and in October, relaunched Karen Millen and Coast, having completed the acquisition of these two brands in early August. We're really pleased with the progress to date. We remain excited about their potential going forward, particularly pleased with Karen Millen and Coast opening the group up to a different target market. On to guidance. We're delighted with how we've performed over the first 10 months of the year, and this morning are upping both our sales and EBITDA margin guidance for the current financial year. We now expect sales growth to be between 40% and 42% for the year, having previously guided 33%-38% growth, with EBITDA margins now between 10% and 10.2%, having previously guided to margins being around 10%.
Within this, we continue to see operating leverage in our more established brands, and we'll continue to invest into them and our newly acquired brands as we look to capitalize on the market share opportunities that lie ahead for all our brands globally. All other guidance for this financial year remains unchanged, as does our medium-term guidance to deliver sales growth of 25% per annum and a 10% EBITDA margin. So in summary, it's been a fantastic trading period for our platform of brands. We're delighted with the integration and relaunch of our newly acquired brands, which are all showing great promise. We're continuing to take market share across our focus markets, and we'll continue to invest to capitalize on the global opportunity for our platform of brands.
With that, thank you very much for listening, and now we'd like to open up the call for any questions you might have.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Charlie Muir-Sands from Exane BNP Paribas. Please go ahead.
Good morning, guys, and congratulations. Thanks for taking my questions. Just one, actually. Obviously, you've raised your full year guidance, but it nevertheless implies quite a sharp slowdown in the final two months of the year. I wondered how much that reflects, tightness of inventory, having had such a phenomenal performance over the four-month peak, or how much is that just, a degree of prudence, on how you expect the outturn to play out? Thank you.
Hi, Charlie, it's Neil here. It's completely around guiding as we have done, which is the reasonable level of conservatism in the guidance.
... we're not expecting any, slowdown as a result of inventory issues or, or anything else for that matter, but, it's sensible to be, conservative on the guidance for the last two months of the year as, as we have been. But obviously, you know, we're narrowing the guidance in, and it's getting pretty accurate for the, for the full year. But, but that, that's where we are. I think, you know, the stock is in a very clean position, but there's no, no, shortage of stock for the new season, as we open up, spring and summer at the moment. And, and we've still got, reasonable levels for the, for the sales in January. So we're, we're kind of in a good, good place inventory-wise across all of the brands.
Great. Thank you. And the next question comes from the line of John Stevenson from Peel Hunt. Please go ahead.
Good morning, all. A couple of questions, please. Can you comment on how gross margins have fared against your expectations? I guess it feels like the market was pretty competitive, but your margin looks, well, the level of margin investment is quite modest. I don't know if that was, you know, in terms of how that stacked up against plan, really. Second question, if you can just talk about the performance of the DCs over the peak, and then if any efficiency metrics you can quote or, you know, how long you're able to hold next day delivery against prior years. And then finally, on the Boohoo brand performance, which obviously has been fantastic, how much of that came from new customer recruitment versus sort of reactivations?
So on the gross margin versus expectations, if you take yourself back to when we spoke to you back in October, end of September, October, things have panned out pretty much as we'd expected. And we guided to a little bit of a margin investment in the second half, and that's, that's what we've seen. And in terms of how much of that is promotion, the levels of promotion were similar to what we'd expected. And what I would say is that promotions-wise, we followed the very same pattern that we followed for a number of years, which is participate in the big discounting period. But obviously, we want to try and minimize the amount of margin we're giving away, and that, that seems to work quite well. There's been different patterns, trading patterns this year.
Singles Day was a little bit more important than it has been, and then there was a gap between then and Black Friday, which made things a little bit different. But overall, things went pretty much as we expected. The DCs performed really well, as we said in the release, in both Burnley and Sheffield.
Yeah.
And, there's not really specific that I can quote right now. But what I would say is both were a bit more efficient than last year. Boohoo, we were very pleased with because it was our first peak with automation, and that performed very well. And of course, you get an efficiency gain with the automation. And then Sheffield was more efficient than last year. It was early days at this point last year, so we would have expected that. So again, kind of in line with our expectations, but-
How did the next day offer compare to last year in terms of how long you were able to hold it for?
I think actually with the later Black Friday, things got spread out from earlier than Black Friday. And so it was, if anything, quite helpful, and we were able to get next day come quite quickly in both Sheffield and Burnley. So if anything, I think that was just a different time calendar that was helpful in that respect.
Okay.
Then the Boohoo brand performance has been existing customers and new customers. So we've seen, in the year to date, an increase in new customers, but also we've seen better frequency from our existing customers. So it was, you can tell from the numbers that it was great, great performance.
Yeah.
It's come from engagement with all customers, new and returning.
Thank you. But what's the new customer runway looking like in terms of new actives at Boohoo?
It's been... The active customers has increased. As we've seen before, you get an increase in actives that's below the sales growth rate, and we're getting more spend per customer. So those, all those engagement KPIs have shown similar trends, but a good performance in the peak, in the last two periods for Boohoo. Fantastic performance.
Okay, brilliant. All right, cheers, Neil. Thanks.
The next question comes from the line of Tushar Jain from Goldman Sachs Group, Inc.. Please go ahead.
Yeah, hi. A couple of questions on my side. Just wondering if you can give us a sense of your average basket size trend by brand or on the group level? That would be very helpful. Second question on PLT gross margin, just trying to understand where is the floor. Do you still expect the gross margin to decline in the next fiscal year? And, and a final one, if I may, the cash generation is strong. Just wondering, is there any alternative use of cash apart from acquisition and CapEx that we should be looking?
Okay, hi there. So, on the average basket size trends, we don't break out the KPIs at this point in the year, so we'll disclose those in detail for the full six months period. What we've seen across the brands is similar trends to what you saw in the half year results. So you've seen the order frequency ticking up nicely, average order values up in a reasonable way and average selling prices up slightly, but there's a very mixed picture, different trends in different markets for different brands. So there's an awful lot going on there. But with the healthy trends that you saw at the six months continued into the second half of the year.
For gross margin for Pretty Little Thing, again, it's exactly as we said back in September, October, that the gross margin for the established brands has been normalizing in that mid-fifties area. PLT is a slightly higher gross margin with low levels of markdown, but its levels of markdown are more normal than they were last year, for instance, and that was what was driving the year-on-year decline. But it feels like it's in a more normal area. But I'll caveat that with, we'll always look at how the price elasticity is going and price accordingly to the time frames, and we look at that every single, you know, hour of every day.
So, but what, what we're seeing is that the margin for all the brands is in that kind of mid-fifties area, and it, it feels fairly stable. And then on the, on the cash generation side, it, it again, it is the same, message that we've, been growing cash, or we've been generating cash nicely, but we've got a lot of, investments, to make, and the rate we're growing at, we wouldn't want to be, looking at any alternative uses of cash. But we've got the flexibility, there, to make acquisitions, to, invest in different market, markets and different brands. So, so we're quite happy with the, the cash, cash position.
Great. Great. Yeah, thank you.
The next question comes from the line of Ben Hunt from Investec. Please go ahead.
Morning. Couple of questions. Firstly, where was the focus of your from your marketing spend across the brands? Was there any particular focus on one of them? And secondly, obviously, you've got a bit of margin improvement. You've got the guidance there. Where are you getting the efficiencies from? That's it.
Okay, so I mean, the focus of the marketing spend was very much across the brands. We've got more established brands are still very, very small in the international market. So, we've got marketing campaigns across the piece. And then we've got the new brands coming in that we've started to do some early marketing campaigns for those. So again, it's been very, very broad. We've guided the marketing spend as being quite high as a percentage of sales, as it has been, and that's been what we've done in the four-month period. So we've had some pretty high-profile marketing campaigns, but we've also covered all of the other channels in the same way that we do.
So, that's been pretty broad-based. And then the EBITDA margin guidance, obviously, you've seen the strong sales performance. So we've been able to marginally upgrade the EBITDA margin at the same time as investing in the new brands, MissPap, Karen Millen and Coast, which is great. And we're seeing a little bit of leverage on the distribution costs. And again, that was what we alluded to back in September. And then as we overachieve on sales, you get some fractional leverage coming through more on the central costs. And that was, as we said back then, enough to offset the investments in the new brands.
So we're really pleased that we've been able to maintain that and actually upgrade the EBITDA guidance at the same time as starting to make those investments in the new brands.
All right, then, just one quick final one. On Nasty Gal, do you feel you've come to the end of your price realignment there, and that 54-ish gross margin is probably where it lies, or is there probably still more to go?
It's the same comment as I was just talking about with Pretty Little Thing.
Yeah, okay, fine.
So we're seeing those at price point at the mid-fifties gross margin in there. But with Nasty Gal, you've still got potentially investments to make in its most mature market in the U.S. But in the U.K., where we've been investing a lot, we may be able to ratchet up the gross margin. But again, it's the same comment that we look at that every day. The dynamics can change day by day, but longer term, that mid-fifties margin feels fairly stable.
Okay, great. Thanks.
The next question comes from the line of Greg Lawless from Shore Capital. Please go ahead.
Morning, guys, just one from me. Just on Coast and Karen Millen, just wonder if you could give us a little bit of color on how big the ranges are and what the kind of consumer reaction to the new ranges have been? Thanks.
Morning, Greg, it's Carol.
Hi.
Yeah, we've gone from just launching early October there, just a few hundred styles to up to about 1,000 on Karen Millen now, a little bit less on Coast. Reactions have been great and quite remarkable from about running a value business previously. We've seen different reactions to different areas. I mean, you know, we've seen great reactions to cashmere in terms of jog sets. We've seen shearling, we've seen leather, really performing very well, stitching on some of the work wear that Karen Millen had a very, very strong, the name for previously that we've reintroduced into the brand, and it's done very, very well. So it's been a bit of a mixed bag in terms of best sellers, but yeah, very promising in terms of that range development.
There's still a long way to go, in terms of broadening that out.
Just in terms of how can these ranges get? You obviously, you've got spring, summer coming and then autumn, winter. How—you know, where does it go?
Yeah. I think it's just development of new areas, really. Currently, if you look at the site, you'll see how it's made up, and it's workwear, some going out, lots of coats and knitwear. There's lots of areas, if you look at our other brands, that we've grown into, athleisure, beachwear, you know, stuff for holidays, vacation wear, all of that stuff. There's a load of areas that we still need to grow, and including petite and plus, and all of those other things as well. So that range will continue to grow over the next 12 months, as well as, at the same time, integrating a new supply chain into that brand. So, you know, I think that it's. I was gonna say it's been slow and steady.
It's been fast, but it's been steady, and it's been really well executed.
Thanks very much. Well done.
The next question comes from the line of Sylvia [Goh] from [Fortress]. Please go ahead.
Good morning. A couple of questions from me, please. Firstly, could you give us some color on how the supply chain is shaping up for Karen Millen Coast? And then secondly, could you talk a little bit about how far you have gotten in terms of rolling out the pay later solutions to new markets since the first half of the year? And perhaps finally, is there an update that you can give us on the supply chain transparency from an ESG point of view, please?
So first of all, from a supply chain, John here. From a supply chain point of view for Karen Millen and Coast, as Carol has pointed out, sort of early days at this stage, but we're really, really pleased, plugging in a new supply chain into Karen Millen, very much so around the test and repeat, which has worked very, very well across the other brands. So, Carol talked about about 1,000 options at this stage in Karen Millen and a little bit less than that in Coast. So early days, a lot to do. If you think about it in terms of Nasty Gal, when we launched Nasty Gal over 2 years ago, that was just around 400 options. Today, that sits over 10,000 options.
That will give you some sort of feel about where we have to go yet on Karen Millen and Coast. In terms of the other piece around supply chain, on transparency and ESG, we continue as we always have in terms of our audit process, and that's two roads, really. One is our internal auditors visiting our factories and ensuring that the highest standards in our code of conduct is executed. And secondly, third-party auditors, whether it's manufactured in Europe or whether it's in Asia, again, just validating the audits and checks that we do ourselves. So we continue on that journey. As the industry does, we have more ranges in terms of recyclable ranges across Boohoo, across Pretty Little Thing, and we just see that increasing as we go forward.
Thank you. On the payment, pay later solutions?
Yeah. Hi, Sylvia. On the pay later solutions, I mean, all we'd really say is that getting the right payment type in the right geographical markets is very important, and we've been really making sure that that's been happening. So we've rolled out other solutions, I think, in most markets. And there's lots of different pay later solutions. Customers seem to react positively to it, and I think we're just gonna continue to make sure we've got the right payment types in the right markets.
Okay. Thank you.
The next question comes from the line of Adam Cochran from Citi. Please go ahead.
Good morning. Two questions, if that's okay. Firstly, on the U.K. minimum wage, seeing some reasonable increases coming through again, looking forward, does that have any impact on your supply chain costs, given the U.K. sourcing? Is it something that you would need to mitigate? And then secondly, as the sales performance has come in better than expected, does this make any acceleration in terms of your international DC plans or your future capacity? Thanks.
So the first one, in terms of the U.K. wage rate, what we're seeing are the factories are looking at their efficiencies, and that's around perhaps could be better machinery, et cetera. So, we're working with that, as I'm sure most industries in the U.K. are, that are faced with these increased hourly rates. But in principle, we see it in line with through efficiency. So we're still very much a supporter of made in the U.K and U.K. jobs, and we'll continue to support that as we go forward, in the future. In terms of the DC, you know, we've got Burnley and we've got Sheffield.
We have works going on in Sheffield at the moment where we're building in mezzanine levels, and we're looking at a level of automation in Sheffield also. Including that and some further works in Burnley, by calendar year 2022, that gets us to about GBP 3 billion of net sales. Like anything, warehouses don't sort of spring up overnight. Usually, you need sort of 18 months to 3 years planning. So as you can imagine, we are sort of looking at sort of 2022 and afterwards, and that would indicate at this stage that potentially the next warehouse for the Boohoo Group would be internationally. But we're working through that at the moment. And that work should be complete in the next couple of months.
That's great. Thank you.
... And the next question comes from the line of Anne Critchlow from Société Générale. Please go ahead.
Good morning. Thank you. I've got a couple of questions on Karen Millen and Coast, please. First of all, on acquisition, how are you acquiring those new customers? Do you know where they're coming from? As in, are they previous customers of those brands, or, you know, is there any overlap with your other brands, or are you just getting them by target marketing, social media, and so on? And then a broader question really about your Karen Millen and Coast experience to date. Is there something that makes you think that the Boohoo business model can be applied successfully, basically, to any fashion brand? Does that affect your interest in or confidence regarding any future acquisitions?
So sorry, John here. So I think in terms of the Boohoo model, can it be applied to any fashion model? Yes, it can. I suppose it's really around which fashion models we might think are appropriate to the group and add value to the group in terms of our strategic platform as we go forward. So principally, yes, the model fits, but it's really about which brand may fit with what we want to do as we go forward.
And on the customer acquisition, you can imagine we really just started off with Karen, Karen Millen and Coast in October. So we've seen quite a lot of sales coming from the existing Karen Millen and Coast customers. But we've got limited intelligence on that because going from high street brands to now online pure plays, you can't exactly tell. But from the data that we've got, we can see that we've seen a good response from the Karen Millen customers from before we took over the brand. But also we've acquired some new customers, is what the data is showing.
The marketing that we've done, we've not done big marketing campaigns yet for those brands, a la what we've done with the other brands in the past. So a lot of it's been digital marketing, but we are acquiring customers. And so as Carol said, the reaction's been very pleasing.
Thanks. And a quick follow-up to that. Are you now planning a bigger marketing campaign for those brands?
I'm sure we will be doing.
Yeah, I can add to that. I think, yeah, just for clarity on when it comes to marketing, the principal jobs for both Karen Millen and Coast and Miss Selfridge really has been building that inventory and getting that proposition right. So that's what we've really been doing. We will be looking to launch some smaller campaigns from the spring season, but I think bigger, big campaigns maybe in the second half.
Thank you.
I hope you bought something from there.
Not yet. Sorry.
Potential customer you're buying.
Just as a reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. Our next question comes from the line of Simon Bowler from Numis. Please go ahead.
Hi, team. It's only a quick one from myself, actually, and a little bit kind of modeling related. Just thinking about the minority interests and how that's likely to kind of finish up for the year end. I don't know if there's kind of a hard number or a range you can kind of point towards or, you know, how we should think about, you know, maybe from kind of a margin profile aspect in terms of like, kind of PLT's margins kind of move forward, year-over-year, despite the gross margin decline. Is that a fair way to think about it?
Vaguely, yeah. I mean, we've said that all other aspects of the guidance remain the same, so you could stick with that. I think the strong performance of Boohoo has meant that there's a little bit of a mixed effect on the minority. But, so it should be positive, but I'd assume that as we've said today, that just the other guidance remains the same. You can look at it in terms of the sales growth on your own models and work it out like that, but otherwise, it's probably a couple of months to what we had in previously.
Okay. Right. Makes sense.
Thank you.
The next question comes from the line of Paul Rossington from HSBC.
Good morning, everyone. Well done. Hello? Hi, sorry. Just a quick question. Can you remind me what the split is on sourcing, U.K. versus international versus Asia, and also what your lead times are now looking like out of China, please? Thank you.
So roughly it's about 40, 20, 40 in terms of as the sourcing splits down. We don't disclose our sourcing times out of China, but wherever in the world, we're fast.
Thank you.
Thank you.
As there are no further questions, I'll hand it back to you, John.
Okay, guys. So, thanks very much, everybody, for joining the call this morning. As I stated earlier on the call, a tremendous set of results over the period. So thanks very much, and talk to you all again soon. Thanks. Bye-bye.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.