Boohoo best practice
We’ve never met with online retailer Boohoo but we like the way the company communicates with investors. Boohoo reports numbers very quickly. Six month numbers to August 31st came just 27 days after the accounting period closed. We like their KPIs which are clear and relevant. True, retail is a sector that is well understood by investors which makes things easier and means execs don’t need to spend time explaining what the business does. But even if your business model is less well understood you should be striving for similar levels of clarity and simplicity. “If I had more time I’d write you a shorter letter” is something all should make time for. Oakhall specialises in helping companies communicate complex or unfamiliar business models simply and clearly.
Boohoo PLC is a £1.1bn market cap Manchester, UK based AIM-listed online retailer. The last set of numbers showed revenue up 40%, EPS up 124% and positive cash flow. Boohoo floated at a 50p share price in 2014, opened that day at 85p, but traded as low as 23p after a January 2015 profit warning on a weak 2014 Christmas season. Since that volatile start the shares have followed a relatively smooth hockey stick up to the 101p share price at time of writing.
Boohoo reported its six month figures to 31 August on 27 September. That’s 2 weeks faster than our other favourite retailer, Next. Fast reporting is one of the best implicit signals of a well-run company. US companies generally do this well, UK companies not. Fast reporting leaves the CFO and the finance team 5 months of the 6 month period to actually run the business rather than sweat over historic reporting.
There is a difference between performance indicators and key performance indicators (KPIs). Boohoo shows, in one slide, how their number of active customers, orders per customer, orders per website visit, and $ per order and items per order are all increasing.
Boohoo reports functional rather than nature of expense costs (see our previous Insight) which means we can see exactly what is being spent on marketing, and how efficient the distribution network is.
And being a growing business, capex is rising and so they keep us updated on a three year capex plan.
We’ll leave the final word to the interim result’s opening remarks from co-CEO Mahmud Kamani:
“…I’m sure you’ve all seen the results, I think they’re OK? We continue to work hard but we’re always cautious. Long journey ahead, lots of investment to do and still lots of hard work to do. That’s it from me…”
Oakhall was established by top-rated equity research analysts to help CEOs and CFOs better analyse their own business and strategies, and articulate them to stakeholders. Founder Andrew Griffin spent almost two decades as a technology equity analyst, ultimately as managing director of European technology equity research at Bank of America Merrill Lynch, before working in investor relations, corporate development and market intelligence for a UK listed software company.