Boohoo increased its marketing spend by £22m in the year to 28 February, as the online fashion giant made “record investments” across its multi-brand platform.
The investment came despite rising costs and “weaker demand” taking a significant toll on the group’s profits. Boohoo reported adjusted EBITDA profit of £125m for the year, a 28% drop from the previous year and flat compared to two years ago.
In particular, Boohoo said its higher marketing costs were a result of the business investing in its newly acquired brands. The company has been on something of an acquisition spree over the last few years, acquiring the MissPap, Karen Millen and Coast brands in 2019, and in June 2020 the Warehouse and Oasis brands.
Last year saw Boohoo acquire familiar British high street names including Debenhams, Dorothy Perkins, Wallis, and Burton.
According to group chief financial officer Neil Catto, there is an “elevated level of marketing” on these new brands of around £11m. Speaking on an investor webcast today (4 May), Catto said he is confident this investment will produce growth for the company.There’s no downside for Boohoo in buying Debenhams’ brand
“We’ve been building the portfolio of brands over the last couple of years, and we’ve got a big portfolio there that is producing rates of growth that you’re not seeing from the more established brands. So that’s going to start to come through in the second half of the year,” he said.
However, GlobalData’s senior apparel analyst Emily Salter says the success of Boohoo’s acquired brands is not a certainty.
“The question of how successful its acquired brands are remains,” she says, even as the business utilises its “expertise” with increased marketing activity for brands such as Karen Millen and Dorothy Perkins on social media and out-of-home. Boohoo also partnered with celebrities Christine Lampard to promote Wallis, and Laura Whitmore to promote Oasis, she notes.
With a much broader portfolio of brands, Boohoo claimed to have a larger addressable market. The business said it had identified around 500 million “potential customers” across its brands, and is now looking towards “longer-term competitive positioning” over the next few years. The company “expects to emerge from the pandemic in a far stronger position compared to two years ago”.
Increased marketing spend across the group’s new and established brands is aimed at supporting this future growth, co-founder and group executive director Carol Kane said.
“We’re investing in the future to enable our brands to scale above and beyond what they’ve already achieved this year,” she said.
The inflation impact
Online retailers experienced a spike in demand during the pandemic, and so for Boohoo, a key focus for the next year is retaining the “significant” market share gains it made over the the last two years in the UK and US. Active customer numbers has grown by 43% across the group to 20 million since 2020, and 10% over the last 12 months.
Total group sales are up 61% since 2020, while in the UK, Boohoo recorded 27% revenue growth during the last financial year. The UK is Boohoo’s biggest market, accounting for 61% of its revenue. The success in the UK represented “good brand positioning and strength of brand portfolio”, the group said.
After two years of pandemic lockdown, [consumers] want to go out and they do want to refresh their wardrobes.
Carol Kane, Boohoo
CEO John Lyttle asserted that despite the challenges, the group is “very, very confident in terms of the business model”. Post-pandemic, Boohoo is seeing purchases driven by “pent-up demand” in many of its categories, he said.
Executive director Kane pointed to the dresses category as one area where consumers are now spending more. She said the category is now “out-performing pre-pandemic levels”, and that sales are up 100% year-over-year.
Kane predicted that the current inflationary environment won’t dampen that pent-up demand for Boohoo’s core brands, including Boohoo.com, Missguided and PrettyLittleThing. These core brands attract 16–24-year-olds, who are keen to get back to life, and shopping, after the pandemic, she said.
“We aren’t seeing these customers’ wallets squeezed in the current inflationary environment. A large proportion of them aren’t exposed to the price increases that many households are facing,” Kane explained. “And after two years of pandemic lockdown, they want to go out and they do want to refresh their wardrobes.”
However, with an expanded brand offering, and therefore an expanded target demographic, many of Boohoo’s customers will be facing inflationary pressures on their discretionary spending. The firm said it will work “to maximise efficiencies in its operating model and mitigate where possible before passing prices onto consumers”.
Optimising marketing spend
Amid rising costs, one way in which the Boohoo group is looking at leveraging its costs is by recapturing “marketing efficiencies as brands scale”.
Kane said the group is aiming to optimise its marketing spend and has a “clear focus on where [it’s] getting the best return for investment”.
Despite the diversity of the group’s portfolio, some marketing techniques remain applicable across its brands. Kane said collaborations have become “part of [the group’s] DNA”, such as BoohooMan’s collection created with England footballer Jack Grealish, and a Karen Millen range created with 90s’ supermodel Helena Christensen.
The group is also starting its “journey” into the metaverse, said Kane, with the launch of a virtual fashion week in collaboration with Paris Hilton, as well as NFTs.
“For now, it’s not about monetization, but driving further engagement with our audience. We’re seeing it as a way to be innovative and a disruptor,” she said.
Real-life events, as well as virtual, are a focus for Boohoo. The company’s brands did activations at New York Fashion Week and Coachella in the US. Events are also helping with the repositioning of some of the group’s brands. Kane said the group took part in several wedding fairs in the UK, as part of its repositioning of the Coast brand as events-wear.
There are also “numerous growth opportunities” through Boohoo’s direct to consumer proposition, Debenhams, and strategic partnerships, the business added.