Boohoo is desperately trying to free itself from last week’s negative sales report, following a profit warning prediction 25% lower than previously forecast. The online retailer’s most recent financial results reveal a significant drop in cash flow per share from the 3m mark in 2013 to below 1m for the previous year.
Having increased its cash reserves by 17.45% (or 804.00k), the company earned 5.88m from its operations for a Cash Flow Margin of 5.35% and has additionally used 4.58m for investment activities and paid 498.00k in financing cash flows.
As the bank described Boohoo’s profit warning as “indicative of an early-stage, high-growth online business” but that “nothing has fundamentally failed”, Boohoo’s current share prices are arguably pessimistic despite the more recent profit fall.
The Chairman and Non-Exec Directors of the retailer have acted accordingly, however, proceeding to buy more shares in the company as a potential effort to reassure its investors. Following the profit warning scare which triggered a 40% shares collapse, the group, including Mothercare’s new boss Mark Newton-Jones, have moved to prop up share prices and snap up Boohoo’s at a discount.
This has provided Boohoo with a necessary boost, purchasing £132,000 of stock combined. Citi has equally pledged its support for the online retailer, joining the likes of N+1 Singer, Canaccord and Investec in reiterating a Buy recommendation for Boohoo.
The New Year has proven rocky for Boohoo compared to the last, having previously enjoyed a sales growth of 47% in the six months to August 31st, which originally expected a 62% increase in annual pre-tax profits to £17.3m. The retailer’s financial results do, however, provide a more promising evaluation in some areas, with the retailer’s year on year PLC revenue continuing to grow from 67.28m to 109.79m year on year, while net income improved drastically by 227.90%.
Losing customers to other retailers offering heavy discounts, Boohoo was equally affected over the Christmas period due to reports of delivery firm issues. With the opportunity to physically view discounted items and ensure reliable delivery, it is necessary for Boohoo to ensure digital stability and quality of service to get ahead of high street competition.
External challenges faced by Boohoo have also affected online retailers such as ASOS, which is awaiting financial results predicted to be disappointing compared to previous expectations. Boohoo is now seeking to regain popularity through its relationship with investors.