The fashion industry, especially for the youths mostly aged 13-30, has taken a massive turn with investors using this gap for investment and companies shifting each wanting to take control of this adverse opportunity. Boohoo and Asos have taken the lead on this industry with Boohoo, recently established proving to be a massive competitor to the large Asos company. The competition Boohoo company brings to Asos aims to assess its strengths and weaknesses and identify the opportunities and threats and how easy it is to be on top of this industry. For general commentary, Asos company is used as a competitor because of how well established it is because it was founded in 2000 in London. It has also managed to be one of the leading companies in this industry with its overwhelming company growth, including its net income. The number of employees, valuation, twitter followers, location, and percentage of tweets with engagement is some of the sources used in this competitive analysis. Financially, net income, operating income, and market cap are used to show a company’s growth and some of its weaknesses and strengths. The number of orders made by Asos in the year 2019 brought in some limitations in the financial analysis since it was inexistent, and it is well known that every penny of a company is to be accounted. Also, the total funding raised by Asos inexistence made it difficult for the efficiency of the competitive analysis between Asos and Boohoo.
Fashion is a word that initiates more than clothing to the youths, where most of them want to be fashionable and up to date with fashion trends. The fashion industry has immensely grown and with the ease of accessing the internet, most of the fashion trades are on the online platform keeping up with technological changes. E-commerce platform dates back to 1991 when the internet allowed it, and it has rapidly grown to accommodate the fashion industry where most people can shop online anywhere. Media coverage is one of the market places used in the online fashion industry. Media is known to capture the attention of many youths from the many invented media platforms, including Instagram, twitter, face-book, websites and tik-tok. Data is collected from the likes, retweets or shares from these platforms whereby the companies analyze and find a way to fill that market gap. These platforms are used to avail the products to the targeted customer where they buy, and incase of any details missing from the product, they send a feedback. Online stores and wholesome stores are readily available to the customer which are usually stocked up by the company through the logistics incases of the international companies. The organizational structure of significant fashion industry companies typically run from the CEO, the directors of a specific department, managers of a particular department then to the employee who quickly reaches the customer. The E-commerce fashion industry is a gap that many investors should emulate as long as they keep updated to the changing technology to and fashion trends avoid technology chaos. They should also be keen on online fraudsters.
Boohoo.com, which recently changed its name to boohoo group plc, is an online fashion retail business founded by Mahmud Kamani and Carol Kane in 2006 whose main target is youths mainly aged 16-30 years. It primarily deals with It is based in Manchester in the United Kingdom, where most of the operations are controlled. Boohoo group executive chairman remains Mahmud Kamani to date and the group co-founder and executive are Carol Kane. The recently appointed chief executive officer is John Lyttle who recently joined the group on 15 March and lastly the chief financial officer being Neil Catto. Its business operations have grown from UK, US and France to over 100 countries worldwide. This made the group to invest in language websites including French, Russia, English, German, Italian and Spanish. Boohoo has managed to be among the top fashion industry companies and managed to own a few brands including boohooMAN which majorly deals with men’s wear, PrettyLittleThing, Nasty Gal and M9ss Pap and designs. Owning these brands has helped the business to skyrocket its profit and increasing its number of customers to about seven million. Its revenue grew adversely in years with revenue in 2018 being 579.8m euros and 2019 being at 856m euros which gained a profit before tax of 43.3m euros in 2018 and 59.9m euros in 2019. It has invested in technology with a recently employed chief Information Officer Jo Graham and all the staff of the group urged to promoted the business using social media and all other media platforms.
Boohoo group revenue has increased significantly, with 2020’s revenue up by 44%. Revenue at 2018 was at 579.8m euros ,2019 at 856.9 m euros and that of 2020 at 1.2b euros. This significant change is accredited to the new CEO john Lytte appointed in March 2019 who has brought positive change in leadership and managing of the group amidst other factors. Owning other brands can also be accredited to this change. Taking a look at PrettyLittleThings, which the group managed to get 100% ownership this year, it has managed to reach revenue of 374m euros which was 107% increase by itself. This brand aims at bringing reasonably priced fashion sense and style to young feminine fashion breakers and makers which has seen its distribution center relocated to Sheffield. BoohooMAN brand also owned by Boohoo group has helped increased the number of active customers to more than 7million due to its affordable and sensible fashionable men’s wear. All other brands owned by Boohoo group including Nasty Gal, Miss Pap and Boohoo have each contributed to the revenue increase in the group. The use of successful celebrities, endorsement, customer preposition of great fashion at unbeatable prices and an extensive and engaging social media presence has made it distinct from its competitors. Its competition to other fashion groups has also been accredited to its risk management team to cater for some weaknesses which other competitors would use for their own advantage. The gross profit of the group has increased by 42% in the previous years, with that of 2019 being 59.9m euros and 2020 at 666.236m euros. The EBITDA has risen by 59% with 72.601 m euro and that of 2020 being 115.55m euros.
Boohoo group being listed on the London Stock Exchange has seen its share price rising to an average of 360p to 413.20p. Dividend policy used in this group depends on some factors which relate to both company performance, the retail fashion industry, and lastly general stock market trends and the dividend is usually given once per year. However, the year 2019 directors opted that no dividend so that these cash would be used for capital expenditure projects. Top five shareholders of the group are Mr. Mahmud Kamani, Merian Global Investors, Invesco, Baillie Gifford, Rabia Kamani. Boohoo group has a ROCE of 27% which is higher than the average 17% in the e-commerce fashion industry showing that the group’s performance is exemplary. Boohoo group ROE is at 22.2% which is fair compared to the 21% average e-commerce fashion industry. Comparing boohoo to Asos, with projected earnings per share for the current year of 75.7p and a share price hovering around the £61.40 mark, ASOS is valued at around 81 times projected earnings. Boohoo meanwhile, with projected earnings per share of around 2.7p this year and a share price of 240p, is valued by the markets at almost 90 times projected earnings. With projected earnings per share for the current year of 75.7p and a share price hovering around the £61.40 mark, ASOS is valued at around 81 times projected earnings. Boohoo, with projected earnings per share around 2.7p this year and a share price of 240p, is valued by the markets at almost 90 times projected earnings. Asos has a ROCE of 22% while Boohoo ROCE is higher making it an excellent performer in the e-commerce retail industry. Its ROE though, is at 14.38%, which is arguably fair although ROE of Boohoo is far much better.
The financial fiscal year 2020, which is usually in February at Boohoo group, had a non-current asset amounting to 185m euros, which is considerably high and has been increasing from the last few years. The fiscal year 2019 registered a non-current asset amounting to 143m euros. The group has invested heavily in distributing infrastructures with a distribution center at Burnley fitted with high level of automation. The PPE of the Group at the fiscal year 2020 was at 2.44 slightly higher than that of 2019 which was at 2.17. The working capital of the Boohoo group has been changing, 2018 at 19.31 million euros, 2019 at 34.02m euros and 2020 is currently at around 484,000 euros. Due to the current coronavirus pandemic, Boohoo group inventory days have increased from February 2019 to February 2020, showing that sales might have slowed. However, the CEO with financial directors are working on how to improve these sales. Ranging from the past ten years, the Boohoo group registered the highest inventory at 81.84 as the most senior and a mean of 66.86 and the lowest inventory day being 51.63. Days payable during the fiscal year 2020 has decreased at 19.95 compared to the fiscal year 2019, which was at 29.32, showing the group’s acceleration to paying its customers. Compared to Asos, which has a ratio of 0.83. Asos inventory days increased to 117.00 on February 2020, showing that their sales have also decreased. Asos has a non-current asset of 640.5m euros which is higher compared to Boohoo group, also its investment of 100,000 euros for 2020 to date is lower than that of Boohoo group.
The highest Boohoo group current ration over the past eight years has been at 3.66 with the lowest being at 0.91 and a median of 1.8. It has a current ratio of 1.76 lower than the previous year, with a ratio of at 1.83 and that of 2018 being 2.06 slightly higher than that of 2018. This indicates the group’s its financial strength within a short while. The acid test is at 1.30 slightly lower than the average ratio and higher than 0.7, where the business is said to be at high risk of its inability to sell its inventories in a suitable manner. The monthly coverage data for Boohoo group is at 0.454 which is slightly low that the average. Comparing these values to those of other companies in the e-commerce fashion industry, Asos has a current ratio of 0.83, Zozo incorporation has a ratio of 1.25 which is second from Boohoo group. It is also ranked higher than the 62% 0f 1018 businesses in the e-commerce fashion industry. A comparison made of Boohoo group and other businesses in the retail industry shows that the business is capable of promptly selling its inventories with Asos, which has the lowest ratio at 0.16, showing that the company cannot sell its inventories at a fortune time. Following these ratio, Asos is ranked below 95% of the 1018 businesses in the e-commerce fashion industry. Asos is followed closely by Cnova with an acid test ratio of 0.30.
Boohoo group has a current debt of 4.76m euros due to secured bank loans and the current portion of secured bank loans from the fiscal year 2020, which is less than the previous year fiscal year loan of 7.146m euros. This debt is being used for undertaking boohoo.com UK Limited of 164.6 euro, as well as all present and forthcoming belongings, book and other debts, chattels and goodwill both in the present and future times. The Net gearing of the group has been increasing annually from -8.71 at 2018, -6.48 at 2019 and -0.68 at 2020 with a gross gearing of 42.42% during the year 2020, 38.51% for year 2019 and 34.91% for year 2018. These ratios obtained using total depth net of cash ratio to a total of shareholders funds and debt funds. Comparing 2019 years with Asos, it had a gross bearing of 17.75%, which was lower than that of the Boohoo group. It has an interest cover of 232.46, ensuring its financial strength. Considering the enormous and increased cash inflow into the business equating to 56% of its EBIT, the Boohoo group is not on the verge of cash outflow in the future years and it can reduce its debt to zero whenever it wants to. It can also take on more debts since it has no massive debt loans to improve the business and strengthen its market stock even when encountering pandemics and facing risks.
The cash flow at Boohoo business for operating activities involved several operations with profit of the year at 72.8 million euros. There were a number of adjustments ranging from share-based payment charge, depreciation charge, sale loss and fixed assets loss, finance income, finance expense and tax expense totaling to 126.7 million euros. Increase in inventories, trade, other receivables and payables were also part of operating activities which needed cash flows. The net cash generated from these activities was 115.6 million euros after a tax deduction of 127.3 million euros. cash flows from investing activities revolved acquisition of intangible assets, property, plant and equipment, proceeds from the sale of fixed assets and finance income received generating a net cash of 43.8 million euros. cash flow from financing activities was included, which involved proceeding from the issue of ordinary shares, purchases of own shares by EBT, finance expense paid. Also, dividend paid to no-controlling interests, lease payment and repayment of borrowings generating a net cash of 24.3 million euros. The increase in cash and cash equivalents was 47.576 million euros, with cash and cash equivalents at the beginning of the year being at 197.872 million euros and at the end of the year being 245.448 million euros. the free cash flow to equity is at a ratio of 0.62. After dividend payment, the balance for the cash flow then becomes 69.9 million euros.
Although Asos is one of the leading companies in the e-commerce fashion industry, Boohoo a recently established company has shaken this industry which has got investors talking. Compared to the available 2019 revenue earned, Asos managed to generate a significant figure of $ 2.733 billion euros which although it is a significant figure, Boohoo group 2019 revenue was at 294.6 million euros, with an increase of 48%. With the appointment of a new CEO John Lytte, he has seen the buying of more brands, controlling auditing through the auditing managers and distribution centers. This has seen PrettyLittleThings being relocated to Sheffield for easier customer delivery, feedback and accuracy also, high speed automotive center at Burnley to help increase customer service and time taken but a few. The gross profit of Boohoo group has increased in the previous years, with that of 2019 being 59.9m euros, while Asos’s gross profit stands at 1.334 billion euros. Both companies have been listed on the London Stock Exchange. Boohoo group has a ROCE of 27% which is higher than the average 17% in the e-commerce fashion industry showing that the group’s performance is exemplary while Asos has a ROCE of 22%. Boohoo group ROE is at 22.2% which is fair compared to the 21% average e-commerce fashion industry with Asos ROE is at 14.38%. Comparing boohoo to Asos, with projected earnings per share for the current year of 75.7p and a share price hovering around the £61.40 mark, ASOS is valued at around 81 times projected earnings. Boohoo meanwhile, with projected earnings per share of around 2.7p this year and a share price of around 360p-420p, is valued by the markets at almost 90 times projected earnings.
Fashion industry has got many investors talking with an average of about 1108 companies in the e-commerce fashion platform. One of the many businesses invested here is the Boohoo group, which owns a variety of online brands including PrettyLittleThings which has brought a tremendous profit to this group. This brand has been relocated to Sheffield to ease distribution of customer orders. Another brand, boohooMAN has led to increase in Instagram followers to over 7 million and active customers to 13.9m a 31% increase from the previous 10.6m active customers in 2019. These group is 13 years old and has shaken the giant companies in the industry including Asos with its distinct operations from using high profile celebrities, extensive product range, bringing affordable style to the young female fashion makers and breakers and the newly introduced SMS for reaching UK based customers. This has seen its revenue increasing by 44% generating 1.2 billion euros in fiscal year 2020. The gross profit has also increased by 42%. Cash generation in the group is strong with an operating cash flow of 127.3m euros and free cash flow up 26% to 81.7m euros and a net cash balance of 240.7m euros. Considering the enormous and increased cash inflow into the business equating to 56% of its EBIT, Boohoo group is not at the verge of cash outflow in the future year. Boohoo group has an interest cover of 232.46, ensuring its financial strength. Boohoo group is one of the large e-commerce business which has risen to top ranks within a few years and seems to take over this industry soon.