June 12, 2018 / 6:25 AM / 6 months ago

Britain's Boohoo rides online retail road as others fall away

LONDON (Reuters) - Boohoo (BOOH.L) confirmed its position as one of the few winners in Britain’s brutal retail market on Tuesday as its online fast fashion and low prices attracted young customers at home, in Europe and the United States.

After years of mounting strain, Britain’s clothing sector has been upended in 2018 with traditional giants such as Marks & Spencer (MKS.L) and House of Fraser forced to shut stores as consumers shop online for cheaper goods.

Several major names have gone out of business as retailers selling everything from clothes to electronics and discounted goods have closed, with the loss of thousands of jobs.

Founded in Manchester, northern England, in 2006, Boohoo has expanded rapidly, purchasing the PrettyLittleThing and Nasty Gal brands in recent years.

Boohoo, whose model echoes that of bigger online peer ASOS (ASOS.L) which has also grown rapidly around the world, reported first-quarter revenue up 53 percent to 183.6 million pounds ($246 million) as its 16 to 30-year old customers snapped up its own-brand clothing, shoes and accessories.

In contrast Ted Baker (TED.L), a 30-year-old traditional fashion retailer that has outperformed many rivals with strong international growth, posted a 4.2 percent rise in revenue for the 19 weeks to June 9 and noted the “challenging” external trading conditions across many of its markets.

Struggling high street group New Look also released full-year results on Tuesday, with an underlying operating loss of 74 million pounds showing why it cutting costs and closing stores.

“Our multi-brand strategy is delivering above-market rates of growth globally,” Boohoo’s joint CEOs Mahmud Kamani and Carol Kane said in a statement.

Shares in both Boohoo and Ted Baker drifted lower, giving the online retailer a market value of 2.4 billion pounds and Ted Baker a value of 1 billion pounds.

The one threat to the pure online players has been the need to step up spending on technology and logistics to meet demand and stay ahead of the online fashion pack.

“Boohoo’s ambition to be the best-in-class internet fashion retailer globally will come at a price, in our view,” RBC analysts said. “We therefore believe incremental investment in the business is a question of when, not if.”

Boohoo is making record levels of investment to build a distribution network able to support 3 billion pounds of net sales globally. It reported full-year revenue of 580 million pounds in April.

The company reiterated its full-year outlook of revenue growth of 35 to 40 percent and adjusted core earning margin between 9 to 10 percent.

Reporting by Kate Holton; Editing by Sarah Young and Alexander Smith

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