Boohoo’s party frocks to loungewear has tapped the mood of young consumers in lockdown. The agility of the online retailer, whose ranges change by the day, has also caught the attention of investors. While the share prices of most UK retailers have suffered big falls, Boohoo’s is at an all-time high. Its £5.2bn market value would see it join the FTSE 100 if it traded on the main market rather than Aim.
Boohoo this week said sales would rise at least 25 per cent this year, in stark contrast to the sharp falls expected at established high street rivals such as Next and Marks and Spencer. Even brands that appeal to the same young customer base as Boohoo, such as Primark and JD Sports, will suffer sales fall this year.
Boohoo is also outpacing online peers such as Asos and Frankfurt-listed Zalando, though not by as much. Part of the reason is that its £1.2bn of annual sales are under half those of UK peer Asos and nowhere near the €20bn or more of global fashion groups Inditex or Hennes & Mauritz.
That helps it keep its supply chain short. About 40 per cent of its cut-price clothing ranges, mostly targeted at 16 to 24-year-old women, are made in the UK. It makes small batches initially and does larger runs if they sell well, so it never needs margin-shredding sales to clear stock. “Our suppliers are experts at our test and repeat model and our need to turn things around quickly,” the company said.
Profit margins are also strong. Peter Williams, a former Boohoo chairman who previously served as a non-executive of Asos, said this was partly because it was an own-label business. “Asos sells other people’s products as well as its own. That dilutes the margin percentage,” he said.
Zalando and increasingly Next are also platform businesses, selling brands from Topshop to Ted Baker alongside their own. Boohoo has preferred to buy in brands to extend its appeal. It acquired Karen Millen last year, and Oasis and Warehouse this week. It has made no secret of its willingness to acquire more, and has £350m of cash to do so.
And unlike Asos, which started several years earlier, Boohoo did not build its own information technology. “They were early adopters of things like Salesforce and Amazon Web Services,” said one former employee. “They took the view that if you could buy it off the shelf at reasonable cost, then do that.”
“Their staff are all young . . . it’s not run by a load of old men who don’t understand how digital marketing works,” she added. “And they’re not afraid to make mistakes. If something doesn’t work, they just move on and try something else.”
