Taps Investors to Help Fund Growth as Sales Boom

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  • 50 million-pound share offer will help pay for new warehouse
  • U.K. online fashion retailer raises full-year sales forecast Plc raised 50 million pounds ($65 million) in a share placement to help fund the construction of a new warehouse as the U.K. online fashion retailer reported booming quarterly sales and raised its annual forecast.

The company sold 22.7 million new shares to institutional investors at 220 pence apiece, it said in a statement Thursday, a price barely below its last closing value. The family of co-founder Mahmud Kamani also sold part of its stake at the same price.

The retailer is tapping surging demand for its shares, which have almost quadrupled in the past year as investors have latched onto its formula of offering fashionable own-brand goods to a target market of 16- to 24-year-olds. After failing to meet sales growth targets in the first year after its initial public offering, Boohoo has consistently beaten lofty expectations. The shares rose as much as 7.5 percent to a record 237.25 pence in early London trading.

“Boohoo has good momentum with all brands and regions showing an acceleration in growth,” Caroline Gulliver, an analyst at Jefferies, said in a note.

The proceeds from the share offering will part-fund the construction of a 600,000 square-feet warehouse as the company seeks to meet rising demand. Costing about 150 million pounds over the next three years, the new site will provide more than 1.5 billion pounds of net sales capacity. That’s in addition to an estimated 1 billion pounds of net sales that can be supplied from its extended site in Burnley, northwest England, the company said.

The family of Kamani, who started the company with Carol Kane in 2006 and continues to run the business with her, will continue to own 38.6 percent of the stock after selling about 36.6 million shares at the placing price. They won’t sell any more for at least six months.

Boohoo said it now expects group revenue growth for the year ending February 2018 to be about 60 percent, ahead of its previous forecast of “approaching 50 percent.” It didn’t change a projection for an Ebitda margin of about 10 percent.

PrettyLittleThing, an online fashion seller acquired at the start of this year, had “exceptionally strong revenue growth” in the first quarter, the company said. U.S. fashion label Nasty Gal has made a promising start since Boohoo bought it out of bankruptcy, with revenue growing strongly month on month, it said.

Highlights of the first-quarter statement included:

  • Total revenue up 106 percent to 120.1 million pounds
  • Like-for-like sales up 78 percent
  • Boohoo brand revenue up 48 percent, including growth of 41 percent in the U.K., 44 percent in the rest of Europe, 97 percent in the U.S. and 50 percent in the rest of the world
  • Gross margin down to 54.2 percent from 56 percent a year earlier
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