Fashion retailers Boohoo and Primark have both reported better than expected sales – highlighting how both online fast fashion and in-store are thriving.
Boohoo posted a 49% jump in annual profits on revenues of £856.9 million for the year to 24 April 2019 – shares are up 40%. Primark, meanwhile, reported operating profit up 25% to £426 million over the same period, however shares have dropped on the news.
Most of Boohoo Group’s growth has come from its sub-brand PrettyLittleThing, which it purchased last year along with up-and-coming brand Nasty Gal. PrettyLittleThing contributed revenue of £374.4 million, up 107% (107% CER) with a gross margin of 56.6% up 140bps. Nasty Gal delivered revenue of £47.9 million up 96% (100% CER).
Boohoo has been steered to growth by new CEO John Lyttle, who joined the company from Primark. He says: ““I am very excited to have joined the boohoo Group at this key stage of its growth, with the group’s disruptive and proven business model having delivered yet another excellent set of financial and operational results. In my short time within the business, I am delighted to have been able to meet a number of hugely talented people and have already been able to see many parts of the business. This has confirmed my belief and optimism that the group’s investments into its brands and infrastructure have allowed it to develop a scalable multi-brand platform that is well-positioned to disrupt, gain market share and capitalise on what is a truly global opportunity.”
Meanwhile, at Lyttle’s old company, Primark, the picture is also rosy and shows that offline fashion still has some legs. The retailer, which has no online sales presence, logged a 25% rise in profits at its stores on a rise in sales in the UK of 4.4%.
Having opened its largest ever store last week in Birmingham, the company is now looking to expand into Eastern Europe, says Finance chief John Bason, despite the company seeing a 1.5% drop in sales in Germany over the past year.
However, the retailer still has no plans to introduce online, although it is toying with introducing a click and collect service.
According to James Dye, UK business director, commercetools:
“This is an interesting move for Primark because it has – unsuccessfully – trialled e-commerce in the past with ASOS. However a click and collect offering is very different and suits its focus on physical store experience. Click and collect enables the convenience of e-commerce, while not cannibalising store sales. In fact, it actually does the opposite, driving traffic to stores without setting a precedent of free online returns. It’s also the perfect timing for Primark to trial click and collect from a technology perspective. This is because it gives the retailer the opportunity to avoid the drawbacks of monolithic legacy systems and leapfrog into an API-first, cloud-native approach to commerce, utilising platforms built for this type of omnichannel interaction that meet high demands consumers expect.”
Primark was the only ray of sunshine for parent group Associated British Foods (ABF), which registered zero growth over the year. About half of ABF’s revenue and profit comes from Primark, while the other half comes from food brands such as Ovaltine, Ryvita and Twinings, and major agriculture and ingredients businesses.
These grocery businesses saw growth of just 5% over the year, with group revenue rising by just 1% to £7.53 billion. However, a slump in sugar prices sees ABF’s overall operating profit in sugar slump from £106 million to just £1 million.