Hello, everyone, and welcome to the Boohoo Group PLC trading update. Throughout the call, all participants will be in listen-only mode, and afterwards, there will be a question-and-answer session. Just to remind you, the conference call is being recorded. Today, I'm pleased to present John Lyttle, Chief Executive Officer. Please begin your meeting.
Good morning, everybody. Thank you for taking the time to join us this morning for our Q1 Trading Update Call. I'm joined here by Mahmud, Carol, and Neil. Firstly, I'm going to take you through the Q1 update, and then we'll open up the call to Q&A after that. First of all, on the group performance, we feel that these results demonstrate yet another strong trading performance for the group and a great start to the year with sales up 39%. 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 27%, which we believe to be well ahead of the wider market when you consider recent reports.
For example, weak trading figures reported by the BRC last week caught us by surprise when we ourselves in May had our largest ever week outside of Black Friday. We're delighted for the first time the group topped the U.K. Hitwise rankings for the share of traffic in May. Our international markets took another great step forward with sales up 56%, accounting for 45% of group revenues in the quarter. We are well on our way to having 50% of our business overseas. By region, Europe grew 72%, the U.S. 64%, and the rest of the world 26%. With this strong growth across the board in our international markets demonstrating the potential for all of our brands to appeal to a fashion-conscious audience on a global scale.
Now, by brand, Boohoo delivered another period of strong growth with sales up 27%, backed by a healthy gross margin that increased by 210 basis points. I'll call out that retail in particular delivered an exceptionally strong trading performance in both women's wear and men's wear. Sales continued to outperform our wholesale business, which has been a consistent theme across the calendar year. This, we believe, is demonstrative of the brand's strength to its target audience. If anything, trading strengthened as the period progressed, which sets the brand up well against toughening comparatives in the coming months. At PLT, we are continuing to see great levels of growth despite incredibly strong prior year comparatives. Sales hit GBP 112 million, up 42%. Gross margins of 55.9% were down 280 basis points year on year, driven by an exceptional level of full-price sales that the brand achieved in Q1 last year.
It's worth noting that its gross margin performance is much more consistent with PLT's gross margin profile from Q2 last year. The brand continues to resonate strongly in the U.K. and markets such as the U.S., with high-profile campaigns planned over the coming months to continue to drive benefits and help further increase brand awareness. Nasty Gal's performance is probably the standout part of this morning's update, with total sales up 153%. Its gross margin of 56.1% was down 280 basis points, which is in line with plan and reflective of the country mix and investments made into the proposition. We're really pleased that its growth remains strong in its home market of the U.S., and it's building on the great progress made last year in the U.K.
We also, in the quarter, launched the brand in France, releasing its first local language site, which has had a very encouraging response in its first few weeks. MissPap, as you know, we acquired the brand early in the financial year. While it's in its early days for the brand, we're really pleased that the acquisition is proceeding as we expected. Operationally, for the group, there's been another busy period the last quarter. As most of you already know, we went live with our automation in Burnley in late March, and we're delighted with how the operation has bedded it in, and we continue to ramp up the operations well ahead of peak. Boohoo relaunched its app, which went live at the end of the period. This was developed in-house and has seen a really positive response in the first two weeks post-go live.
At PLT, we're continuing to invest in international teams following the L.A. office opening, and its expansion of warehousing operations continue at pace, giving the business significant headroom to accommodate its future growth in this financial year and beyond. Lastly, on guidance, we're really encouraged with the trading performance in Q1. There's still a long way to go in the year, but we can reiterate that guidance with a lot of confidence on the back of a great first quarter. So just to remind you, we're expecting revenue growth of between 25%-30%, with EBITDA margins of around 10%, with all other guidance unchanged. So in summary, it's been a really, really strong trading period for our platform of brands.
We're continuing to take market share in our focus markets and really capturing the customer's attention through our combination of providing the latest fashion at great prices with excellent customer service. For me, now we're almost three months into the job, I'm more confident than ever that our combination of brands and operating platform will continue to deliver great levels of profitable growth through the remainder of the year and beyond. 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 01 on your telephone keypad now. If you wish to withdraw your question, you may do so by pressing 02 to cancel. The first question is from the line of Charlie Muir-Sands from Exane BNP Paribas . Please go ahead. Your line is open.
Yeah. Thank you very much for taking my questions. Good morning. Firstly, I wondered if you could elaborate a little bit more on why you think, firstly, you've seen that fantastic reacceleration in the Boohoo brand, and secondly, why you think PLT has moderated its growth quite significantly, whether there's any particular phasing effects around planned promotions in either of those two brands, which will tilt the momentum of them through the rest of the year. Then secondly, obviously noting your maintaining of margin guidance for the year. Just wondered if you could confirm whether you think the shape of the evolution of your cost metrics are unchanged or whether you see those evolving differently from what you gave at the pre-events. Thank you.
Hi, Charlie. It's Neil here. I think if you look at the performance of Boohoo, we've seen quite a gradual improvement step by step from a year ago. In Q2 last year, the margin increased and we saw strong growth. But we've been focusing for the last 12-18 months on raising our game at Boohoo, all aspects of the brand. I think what we've seen in recent months, particularly around our buying and product range, a lot of those things have come together. Last year, it was about improving the look of the website, improving some of the imagery, the presentation of the products. Then very much since John joined, we've been looking at refining the range and also backing products with a little bit more depth of buying, giving us more availability.
And all of those things coming together have just meant that the brands continue to regenerate and reaccelerate. And so we're really pleased with the performance of Boohoo. PLT, different story because a year ago, they had an absolutely amazing quarter. So the comps were tough from that point of view. And also the margin, gross margin, high at 58.7% with very, very little markdown. So PLT's continued to resonate, and also the markdown's still at low levels, strong full-price sell-through. So the health of the brand is fantastic as it has been, as we've seen in recent history, but a little bit of a different dynamic on the comps. And what you're talking about in terms of can that dynamic change a little bit. We always felt that Boohoo had stronger comps in Q2. PLT probably not so much.
But as we're going through the period now where we're anniversarying the good weather last year, the World Cup was just about to happen, lots of different dynamics in the U.K. We're actually seeing very strong growth as we've left Q1 into Q2. So again, we're very encouraged by that as we move through the quarter. But what we have got is we've had a very profitable Q1. We obviously don't disclose our EBITDA until H2, but we're doing all the right things in terms of underpinning the growth for the rest of the year. We've got some great marketing campaigns planned for Q2, and we've also got the headroom to be able to look at the promotional patterns.
But I think if you look at the patterns last year, PLT did less promotion in Q2 as it was preparing for the warehouse move to Sheffield, whereas Boohoo had actually stepped up its gross margin massively in Q2 last year. And we probably wouldn't necessarily expect to see that gross margin step up massively this year like it did last year. But again, we're seeing kind of normal levels of gross margin for PLT and Boohoo as we've seen in Q1. So in terms of the margin guidance, we're sticking with around 10%. There's lots of positives that we're seeing in Q1. We've seen the automation go live very successfully in Burnley, and we've seen the continued gains in productivity in PLT's Sheffield operation. So I think we're probably more optimistic about distribution costs for the year than we were six weeks ago.
So we were guiding a deleverage of about 70 basis points, where I'd rather see that being flat so far this year. And again, we'll see how much productivity we get out of the automations. That could change, but we've probably got an improved view on that for the year. And that gives us a little bit more firepower around gross margin. So we could see some investment around gross margin as we go through Black Friday and later in the year. So those are the only changes. We're continuing to see leverage on the central costs, but we're also continuing to invest in the newer brands, Nasty Gal and MissPap. So I think those are the kind of dynamics around the EBITDA margin for the rest of the year.
Great. Thank you very much.
Next question is from Paul Rossington from Bank of America Merrill Lynch. Please go ahead. Your line is open.
Hi, John. Hi, Neil. One quick question from me. So when I do the reconciliation in the P&L, I've seen MissPap being approximately GBP 0.5 million in sales, and that was for approximately one month of the quarter. So is it fair to assume that the contribution of MissPap for the full year will be around GBP 5 million-GBP 10 million? Yeah, that would be my question. Thank you so much.
Thanks, Paul. We're sticking with what we've said previously on MissPap because obviously, it's overall not material to the group numbers. What we've said after the pre-events was it's low single-digit millions GBP of sales. Of course, MissPap had been in decline as it had been lacking investment. What we're doing is working on reinvesting in the business and seeing the growth reaccelerate. And we're encouraged by what we've seen, but it's only four weeks. So I don't think there's much else that we'd say. So as far as the official line is low single-digit millions GBP of sales. But I think we're encouraged by the performance in the first few weeks that it kind of validates what we said before, which was that we see great potential for the brand. So I think that's the answer.
Okay. And maybe also the phasing of the marketing costs, what do you see there for the full year and in the first half? Thank you so much.
Again, we're sticking by what we said a few weeks ago at the pre-events when we spoke to you then that marketing costs are going to be around about that 9%-9.4% of sales at similar levels to what we saw last year. What we're seeing overall there is that the newer brands are leveraging their marketing costs nicely, but they're still at a higher level than the more established brands, Boohoo and PLT. But what we're seeing within Boohoo and PLT is that we're seeing some great progress in some of the international markets. So we're going to continue to invest in those newer international markets and where we're seeing there's some great potential. And that applies to markets in Europe and in the U.S. as well. So overall, we're expecting the marketing cost to be around about that 9% of sales level.
Amazing. Thank you so much.
Next question is from John Stevenson from Peel Hunt. Please go ahead. Your line is open.
Hi, morning, guys. Got three quick questions if I can. Starting on Boohoo and expanding on Charlie's question. You talk a little bit around the customer KPIs since the brand has been reinvigorated. What are you seeing in terms of active growth, frequency, baskets, that sort of stuff? On the warehouse, can you give us a sense of whereabouts on the line you are in terms of efficiency? We appreciate you for bedding in, but clearly, it's gone well. Where are we now? Where is that compared to where you can get to year-end and then ultimately how efficient that warehouse can be operating or both of them? In fact, and finally on PLT, if you could just touch on if you're starting to sort of build out the range and SKU count any further.
Okay. Sorry, I missed that third question because the line wasn't too good, but I'll take the first two and then you can come back with the third. So Boohoo, in terms of the KPIs, we're seeing encouraging signs everywhere, and that does link back to what I was saying about the brand being in a lot stronger place than it was a year ago. Encouragingly, we're seeing new customers, lots of the number of new customers, and therefore the active is still increasing. Frequency, we're seeing decent signs. Both from repeat customers and new customers, both driving the acceleration. We've actually got transaction values at decent levels as well. All good on the customer metrics for Boohoo. On the warehousing side, the automation's gone live. Early days, we talked about six months to get up to full efficiency.
And in a couple of areas, we've seen it get to levels marginally higher than we were expecting very early on. So that's good. And then in picking, we're seeing improvements up to those levels where we were expecting, but we have fairly conservative expectations in there. So I'm going to reserve judgment until the half year as to exactly what's going to flow through, but you can see from one of the positive factors on the distribution cost line that I would point to. So we're no longer expecting that 70 points of deleverage. So that, I think, combined with other factors. So we've got the efficiency in Sheffield as well, Boohoo then, and those are combating the mix of international sales, which would normally be an upward pressure on distribution costs of potential sales. So what was the third question? Sorry.
Third question was just on PLT in terms of the range and SKU count. If you're starting to sort of build out the offering further this year.
Yeah. So I think PLT, as it's grown, has improved the level of choice that it has and the number of styles has increased. You've seen the phenomenal growth of PLT, and the number of styles hasn't increased in line with sales, but it's got a very efficient range but an incredible level of choice. So I think you've probably got about 22,000 styles on PLT versus, say, an equivalent number of 32,000 on Boohoo and around about 4,000-5,000 on Nasty Gal. But across all of those brands, you've got an incredible level of choice for the customer.
Okay. I'll just say thanks for the background noise for the recording. Thank you.
No problem.
Next question is from Ben Hunt from Investec. Please go ahead. Your line is open.
Oh, hi there. Just sort of, if you could, for completion, maybe tell us a bit about the KPIs for PLT as well. I appreciate it's been tough comps of the gross margin, but this time last year, you were quite optimistic that there might even be some upside to the gross margin, even at the elevated levels you were seeing given the sell-through. Is there anything that's sort of coming through in the KPIs that's maybe suggesting that your pricing position is still keen or is still in line with where you see it versus peers? So specifically looking at the KPIs or the frequency is doing and the average basket sizes.
All of those metrics are positive for PLT as well. As you can imagine, it's grown 42% and at some scale there. In terms of the margin side of things, I think the margin where it has been in Q2 at 55.9% is a more normal level. But don't forget, that's a very, very, very extraordinarily healthy retail margin for a company of the size of PLT. Because within that, it does have some wholesale sales that are a lower margin. The retail margin is kind of one, one and a half points higher than the margin that we report. A very, very healthy margin. That has been, as we've seen with PLT, a continued strong sell-through product. Since probably all through last year into this year, they've had relatively lower levels of promotion.
So what they do have is the firepower to maybe overlay some promotion there, but not to the point of view where I think their pricing is out in the market or anything like that. We're seeing great performance with a slightly higher gross margin than we've seen at Boohoo, and we've seen that kind of trend for a while. But the margin through the last part of last year, so through the second quarter, third quarter, and fourth quarter, was more in line with the margin that we're seeing in Q1 for PLT. Q1 last year was exceptionally high, where there was very little markdown at all in that margin. Probably, I would say, an abnormal margin in Q1 last year. Hence, we're at a more normal level as we sit here today.
Specifically on the frequency, are you seeing some trends as the Boohoo brand with the repeat new customers?
Yes.
Okay. And then you've also highlighted that the retail was exceptionally strong versus wholesale. Can you tell us what's been going on in wholesale and what the disparity in performance has been? Or rather, maybe what is the percentage of sales these days?
Yeah. I don't want to say too much about the wholesale side of things. I think what we've seen is that the retail business has grown faster than the overall growth rate. Our wholesale business is by no means any kind of bellwether for the industry. What we've got in there is a lot of different platforms in the UK and overseas. So there's a whole mixed bag in there. But what we are positive about is that people are shopping more and more on our website and availing themselves of the whole product range for the different brands. That's what we're seeing, I think, there. Obviously, what we do get with our wholesale or third-party business as a whole is it's lumpier than the other parts of the business. So there's nothing really to read into that. It's not that significant for the group.
It's still around about that 5% level of sales. I think that's really all I'd want to say about wholesale and third-party.
Okay. Very thanks.
Just as a reminder, if you do wish to ask a question, please press 01 on your telephone keypad now. Next question is from Simon Bowler from Lynnot Partners. Please go ahead. Your line is open.
Morning, all. Just kind of one quick question. If I understood what you're saying earlier correctly, it sounds like you're, if anything, running a little bit ahead of where you'd hoped from an OpEx perspective, which gives you some room to kind of invest into, I think you mentioned kind of gross margin and promotion specifically. Just wondering what kind of drives your decision to invest into that part rather than reinvest into, say, a delivery proposition or other areas of the overall kind of Boohoo customer proposition? And when you make those decisions, are those decisions done on a brand-by-brand level or is that kind of controlled from the group down?
Those decisions are made at the brand level on a daily, hourly basis. So that's why it's hard to sometimes say what the market's going to be like in six months' time and where we're sitting in that. I think what we've seen over the last 18 months is probably charging more for delivery and investing in a little bit in product margin. But we're also seeing, if anything, probably a bit more elasticity from promotions than we saw a while ago, which suggests that there's probably a little bit less on the overall market in a way. So those are the kind of things that we're seeing.
But what drives the decisions is we very much try different things every day, every week, see what is working, what the customers are really getting indication from, okay, to what the customers are looking for, give them more of what they want. So that's kind of what's driving those decisions. But you've always got that combination of kind of distribution costs and gross margin and alternate to a certain degree. But we're very much looking at that on a trading basis all the time, basically.
Okay. Great. Thank you.
Next question is from Wayne Brown from Liberum. Please go ahead. Your line is open.
Morning, all. Firstly, congrats on a good statement. My question is more around marketing spend. I'd just like to get a feel for the trends going on in the marketplace. Clearly, there's a lot of noise. There's a lot of companies promoting and discounting. What I'd like to get a sense of is what inflationary pressures or competitive pressures, rather, are you seeing across Google, across Facebook, whether it be keyword searches, whether it be the actual costs to acquire customers? Just get a feel for how much of the marketing spend is incremental to use to fend off those kinds of pressures and remain competitive where you need to be, as opposed to necessarily finding maybe new tools to drive traffic, be it for new customers or retained.
I think in terms of inflationary pressures, we don't see a lot of that because that can change in different areas of the marketing mix. In terms of paid traffic, I think there's a little bit of inflation there, not so much that we notice it too much. But what we're seeing is that we're able to invest more into newer markets for us. Obviously, the biggest change is kind of the level of the importance of influencers in there. But again, we're not seeing that much inflation on that. We're seeing that influencers are very much flavor of the moment. But we can still get good deals with influencers, as we've always been able to. And so the overall trend is that I think you're seeing certain areas of marketing that become more important, like social media, paid social, and so on.
But it's just the natural evolution of the way people are thinking, the way people are shopping, moving more online.
Yeah. I mean, yeah. I mean, so a lot of other retailers are talking about Google and Facebook in particular becoming a lot more expensive. So I suppose my question is around, are they just using social media in a less effective way than you are? So you might not be competing with generally the majority of people are competing on similar words or in similar areas of social media. I'm just trying to find why you're finding it a lot more effective, which is obviously a great thing. But just to get a nuance as to why you're actually able to necessarily put your marketing spend to probably much better use than what we may be asking generally in the retail environment. I don't know what your thoughts are around that, particularly around the inflationary pressure.
We tell you we'll have to kill you.
Sorry?
We tell you we'll have to kill you.
That might not be a bad thing.
I think generally, what we're finding is that we've also got great content on the website. We've put a lot of emphasis on improving that, improving lots of different things about the proposition that makes the marketing more effective. So maybe it's around that, but you'd probably have to ask those other retailers too.
Okay. Just lastly, I suppose if we look at the spend, it's obviously increasing quite nicely. Is the proportion of spend, can you just give me a sense of what the proportion of spend is on new versus retained and driving that frequency up?
I mean, we very much look at all our marketing spend as driving new customers. But obviously, you do get a halo effect in that it also drives repeat visitors. So I can't really give you a split on that.
Okay. Thank you.
Next question is a call from Paul Rossington from Bank of America Merrill Lynch. Please go ahead. Your line is now open.
Hi. One more question from me on boohooMAN. Can you maybe give us just a little bit of granularity of where the brand is in terms of how much it is of the Boohoo brand and in terms of maybe qualitatively on the growth rate a little bit? Thank you so much.
Yeah. I mean, we don't give very good guidance on boohooMAN. And some boohooMAN sales are on etc. So it's a fairly complicated picture. But what I would say about men's wear, women's wear is that the women's wear growth rate has been driving a lot of the improvement in the overall growth rate. But where we are is in a similar position that boohooMAN's been performing incredibly well. But the overall growth rate for women's wear is only a couple of points below the overall growth rate for the Boohoo brand.
Thank you so much.
Next question is from Matthew McEachran from Singer Capital Markets. Please go ahead. Your line is now open.
Great. Thank you. Morning, guys. Just a couple of questions to follow on here. Could you help with a bit of data around P&P receipts and uptake of Premier? Generally, the performance of that and how you see that trending.
So P&P receipts, I've alluded to that earlier, that we're probably seeing a higher level of delivery receipts than we were 12 months ago. It varies from time to time as we've got different promotional approaches. But we probably had a little bit more in terms of delivery receipts, and that's in the U.K. as well as overseas. In the U.K., some of that is driven by the uptake of Premier. And Premier, I think customers are generally recognizing it's a great offer and are buying into that more. And that's also good at underpinning our frequency of spend. And it's also rewarding our most loyal customers. So that's where we see Premier. It's very important for our loyal customers that they can get a great deal on delivery. But I think on overall delivery receipts, there has been a kind of a misconception that people won't pay for delivery.
They definitely will if there's a great product offer alongside that. It helps in markets where you're more well-known and people realize that the product's going to be great when they receive it, that they know about the brands. But overall, I think the trend in the market, and we've probably seen this with other e-commerce companies, that are probably charging a bit more for delivery. It gives us the ability to give our customers the best prices for the product.
Yeah. Okay. That's great. Thanks for that. And then the other question is just in relation to pay later. Have you seen that? Have you seen the uptake sort of increase? And what's been the influence there on basket size and conversion and so forth?
Yeah. I mean, we don't have a pay later solution yet in the U.K., but we're looking at launching something pretty soon. In other international markets, it's probably more important. Obviously, the pay later in Europe is extremely prevalent in countries like Germany, Holland, and Scandinavia. So we've seen good uptake there. And so we think it's a big opportunity in the U.K., although the U.K. customer has not traditionally been offered that much of a pay later offering. Not that many people offer it, comparatively speaking. And then it's catching on in the U.S. and also other markets like Australia and New Zealand. We've seen pay later being very important. So those types of payment types are really, overall, more part of the proposition than they ever have been. And we've probably got an opportunity there in the U.K.
Would it be fair to say that, say, by the time you get into peak, that most of the key markets will have deployed it?
Yes.
Okay. Okay. That's great. Thanks very much.
That was our final call for today. I will hand the call back to John for any closing comments. Please go ahead.
Okay. Back to you, guys. Thank you all for joining us this morning. Just to finish off again, we are particularly pleased with Q1. We think it's a great set of results, particularly in the current retail market. We'll bring the call to a close now. Thank you.
This now concludes the conference call. Thank you all for attending. You may now disconnect.