Specialist
Senior executive at Missguided Ltd
Agenda
- Organic growth outlook across brands in the UK, including volume and pricing dynamics
- Competitive dynamics with players such as Inditex (BME: ITX) H&M (STO: HM B), Shein and Asos (LON: ASC), touching on test-and-repeat model dynamics
- Gross margin pressure, highlighting freight rates and raw material costs plus returns patterns
- Boohoo’s (LON: BOO) operating margin outlook, discussing opportunities to offset cost increases through pricing and cost reductions
- Integration and growth of newly acquired brands
Questions
1.
What is your 2022 growth outlook for the UK e-commerce fast fashion market? How does it compare to 2021?
2.
What does the demand shape returning to pre-coronavirus levels mean exactly? What might the demand curve be after 2022?
3.
What factors are driving this 10-15% soft growth rate in the UK e-commerce fast fashion market aside from the return to seasonal-category dynamics?
4.
How do you think about the volume vs price mix in your soft growth outlook? You highlighted an uptick in higher-value products.
5.
Boohoo achieved strong results in the most recent trading update, I think 30%-plus growth YoY, so significantly above the 10-15% you shared. What is your growth outlook for the company in the UK e-commerce fast fashion market based on your market outlook?
6.
How do you think the UK’s rising cost of living impacts a low-price model such as Boohoo? On the one hand, there’s potential for picking up opportunities in trade-down, but existing customers could also be more cautious with purchasing behaviour. How do you marry these factors and what might this indicate for the company’s growth in this context?
7.
What are you observing around other sales momentum drivers such as frequency and conversion?
8.
How do you assess the trends in factors such as ASP and AOV for Boohoo?
9.
How does a group such as Boohoo approach limiting the percentage of returns?
10.
Could you estimate the Boohoo’s returns levels and how it might compare to coronavirus, perhaps as a percentage of orders?
11.
How are you expecting growth to differ from established brands such as Boohoo, Pretty Little Thing, Nasty Gal vs recently acquired brands vs very newly acquired brands? You touched on the outperformance of recently acquired brands such as Coast and Karen Millen.
12.
Which of the brands Boohoo has most recently acquired do you think have the greatest long-term growth potential, and why?
13.
How large could the older demographic become for Boohoo or the newly acquired brands?
14.
What might be the key three integration risk challenges for Boohoo, given the numerous brands that have been acquired over the last two years?
15.
How much of a risk do you think buying multiple brands at the same time and then struggling to integrate them presents to the Boohoo Group?
16.
What do you think is so strong about the Boohoo business model in the UK e-commerce fast fashion market? A lot of the company’s growth, which is above market, seems to be driven by its operating model, which management has said is very strong – I think there was belief in that model at the Boohoo Group level.
17.
How much of a competitive advantage does the test-and-repeat model create in the UK? How easy is it for a new entrant to replicate?
18.
Do you think the test-and-repeat model is sustainable as Boohoo matures in the UK?
19.
How easy might it be to roll out this test-and-repeat model across Boohoo’s newly acquired brands? How easy is it to adopt a similar model for the faster growth brands in the portfolio?
20.
Do you think it’s possible to roll out this test-and-repeat model internationally? Is this model viable in the US and Europe, given Boohoo’s focus on these markets?
21.
The beauty of the test-and-repeat model is it keeps Boohoo abreast of fast-fashion trends. To what extent do you think the model is now slightly outdated for the company’s fast-fashion brands for the younger customer and perhaps these brands have shifted from being fast-fashion leaders to more followers or slightly tired brands in the UK?
22.
What threat do you think Shein presents to Boohoo’s UK growth? One of the threats to the company is the intense pressure in the competitive landscape, and Shein is mentioned a lot.
23.
Could Shein take share from Boohoo in the long term, or is it taking share from other online brands in the UK fast fashion market?
24.
What threat might other UK competitors such as Asos’ own brand present to Boohoo?
25.
Why would an 18-25-year-old fast fashion shopper in the UK shop with the Boohoo fast-fashion, lower-price segment brands vs Asos? What factors go into the decision-making criteria here for these customers?
26.
How do you assess the threat legacy high street brands such as Zara, H&M, Primark, Matalan and Next pose to Boohoo?
27.
How do Inditex’s brands and H&M compare in price and service quality, given you said these are key to the customer?
28.
How important is sustainability for the customer, the younger demographic within the Boohoo Group, to your point customers aren’t willing to sacrifice on style and price? I’m thinking about the Boohoo brand, PLT, Nasty Gal, Misspap.
29.
What sustainability metrics are most important to customers?
30.
There was a fairly public scandal on Boohoo’s supply chain, in particular around labour rights and quality. What progress do you think is required at the Boohoo Group to move past this image of being unsustainable?
31.
How much pressure is there on freight rates for shipping goods to the UK?
32.
What might be the timeline towards some normalisation of freight rates?
33.
How much more expensive is it to ship on a like-for-like product basis vs pre-coronavirus, factoring in freight as well as container costs?
34.
What do you think the gross margin level could be in 12 months?
35.
How realistic and easy is it for a brand such as Boohoo to bring its supply base closer to its home market?
36.
How understanding do you think the customer is in the UK? Are they willing to pay higher prices?
37.
Are the higher-price brands within the Boohoo portfolio facing similar pricing power challenges and gross-margin pressure, so the recently acquired brands with a slightly older demographic?
38.
Is there more pricing power and opportunities to pass more cost on to customers in Boohoo’s more recently acquired brands?
39.
Boohoo has spoken about its marketing levels, which have risen to 11-12% of total sales. How sustainable do you think these levels are?
40.
You mentioned marketing is more expensive and the return is less now than it used to be, I think Boohoo has noted the same trend. Why is that?
41.
How do you assess the Boohoo Group’s M&A opportunity in the next 1-2 years? Obviously, the profitability challenges pose the question around smaller competitors going out of business or potentially being acquired.
