It’s been a choppy first half for the Boohoo (LON:BOOH) share price after getting hit hard in July on reports that Jaswal Fashions, a factory in Leicester, and a reported supplier to the company, was operating below the required standards as set by UK Health and Safety, and was also paying below minimum wage levels.
These revelations rather took the gloss of what had been a pretty impressive Q1 which saw a 45% rise in revenue a couple of weeks before, when the company also confirmed the acquisition of the online operations of Oasis and Warehouse for £5.25m. During the same period the company also acquired the remaining 34% minority shareholding in PrettyLittleThing
Boohoo strenuously denied any knowledge of the malpractices outlined, and promised an investigation, and engaged Alison Levitt, a top QC, to investigate the claims around the supply chain and help restore the company’s battered reputation.
Since then the share price has recovered somewhat, however the damage done to its reputation, along with the loss of a number of key social media influencers pulling their support for the brand did see the appeal of the shares get a little tarnished. .
The company also saw their NastyGal and PrettyYoungThing brands dropped by Asos (LON:ASOS), Next (LON:NXT) and Amazon (NASDAQ:AMZN).
Despite this negative publicity there doesn’t appear to have been a significant impact on the company’s group trading for the period ending 31st August, with the business seeing a boost as a result of the pandemic.
Gross margins were slightly higher from the same period a year ago, up from 54.3% to 55%, however in light of recent events, this may well come down on the second half, if management are serious about dealing with the problems outlined in last week’s independent review.
An update on the findings of the independent review was announced last week, and it didn’t paint a particularly positive picture, highlighting significant shortcomings in the company’s supply chain. To their credit management have pledged to deal with all of the findings outlined in the report which in turn will raise operating costs going forward.
The rise in capital expenditure is also likely to the tune of £80m to £100m is likely to be part of this process, along with further investments being made in capacity in Sheffield and Burnley.
Revenues came in at £816.5m, a rise of 45%, in line with the increase seen in Q1, while profits before tax came in at £68.1m, a rise of 51%.
The company also saw a net increase in cash of £137.6m, though some of that was as a result of the recent share placing to fund future acquisitions.
In terms of the outlook, management were cautious, though we did see an increase in revenue guidance for the full year from 25%, to 28% to 32%. This is still quite a step down from the increase seen in the first half of this year even if it is a modest upgrade
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