boohoo group plc (DEBS) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us this morning for our full year results. Joining me today for our presentation are Mahmud Kamani, our Executive Chairman and Group Co-Founder; Neil Catto, our group CEO; and myself, Carol Kane, Group Co-Founder and Executive Director. Sadly, today, John won't be joining us on the call due to a family bereavement. And between Neil and myself, we'll be covering of John's business update. So just to outline the format for today, I will run through our response to the COVID-19 pandemic as well as some of the highlights of the year we finished. Neil will go through the financials and business updates, and then I will update on what the brands have been doing in recent weeks. After that, we'll open up to the Q&A session. There is -- there will be a box for you to send your questions through. So moving on to Slide 3 and our update on COVID-19. Unsurprisingly, COVID-19 has had an impact on our people, customers, suppliers and the market we operate in. And I just wanted to summarize how we have responded as a group. We are delighted how everyone in the boohoo family and our partners have adapted to the challenges we face. It's because of them that our customers have had a relatively seamless experience to date. And it is the strength of our business that we are -- have been able to adapt so quickly to the circumstances around us. Firstly, though, I would like to stress that the health and safety and well-being of our team, suppliers and stakeholders remains our #1 priority. We have achieved many things in the last 6 weeks to ensure this. We have transitioned all our teams to work from home where their role does not require them to physically be in the workplace. For those remaining in the workplace, we've revamped our operating processes to ensure we have social distancing in place and implemented updated health and safety guidelines and making sure we're all following the government health protocols. For all our colleagues in self-isolation, we're ensuring that they are receiving full pay, and this extends to our colleagues that are deemed at high risk. We've also engaged with local stakeholders, such as MPs, counsel leaders and public health authorities to update them and reassure them on our actions. As a group, we have a diverse supply chain around the world. This has continued to operate relatively efficiently. Our long-term relationships are policing good stead, and we're making sure that we are helping our suppliers through the near-term challenges they are facing. For our customers, they've seen minimal disruption to date. We have worked hard with our warehouse and customer service teams as well as our global logistic partners to manage expectations around lead times. Lastly, we are in an incredibly strong financial position to deal with COVID-19 and on any impact it has on the business, which Neil will touch on. We finished the year with GBP 241 million of net cash on our balance sheet and as a business with a relatively low maintenance CapEx that we can adapt to the environment we're working in today. Now I'd like to show you a short video showcasing some of the operations to give you a sense of how we are operating today with the safety of our colleagues being our priority. [Presentation]

I'm turning to Slide 4 for the FY '20 Year-in review. For the group, the year ending was a record financially, but we also delivered operationally to position the group for continued long-term growth. Our established brands delivered strong profitable growth in all our key markets. We also integrated 3 new brands, strengthening our position in young fashion with MissPap and extending the group's reach with Karen Millen and Coast. Investments in infrastructure saw the completion and go-live of our automation in Burnley. And in Sheffield, we've almost finished the mezzanine rack out, which will double the capacity long term and if we choose to allow for an automation solution to be installed. We are also looking to enhance our customer experience with us and continue to make investments to make sure our proposition is as great as our fashion. For example, adding more payment solutions and bringing our app development in-house to enhance our any user experience. We continue to develop our sustainability framework. Our initial focus has been on our people both within our business and our supply chain, and we are looking at how we can reduce our environmental impact in aligning ourselves with the right partners and industry initiatives. And Neil will touch on these further in the presentation. And on that note, I'd like to hand you over to Neil.

Thanks, Carol. Good morning, everybody, and thank you for joining our full year results presentation. Last year was an incredibly successful year for the group, and I'm going to take you through the financial review. And I'm also going to talk about how we see the outlook for the business in what are obviously very challenging times. So starting with our income statement on Slide 6. You can see that it shows a very strong financial performance last year right across the P&L with our multi-brand approach continuing to work incredibly well. We've driven exceptionally high levels of profitable growth in what was a tough market for many even before the onset of COVID-19. Our revenues increased to GBP 1.235 billion, up 44%. And pleasingly, that was a strong performance for all of our brands in all the key markets. Gross margin at 54% was down 70 basis points from last year, and that was in line with our expectations with the decline driven by investments into our customer proposition that have seen a very strong top line response. And with that, we've been pleased to see that for all of the brands, we've maintained a retail gross margin in that mid-50% range, showing once again the strength of all of the brands in the group. So a strong top line and margin performance combined with some operating cost leverage helped us achieve an adjusted EBITDA of GBP 126.5 million. That was ahead of expectations and up 50% on last year. EBITDA margin at 10.2% was very healthy, up 30 basis points as we've been able to make investments in the order of mid- to high single-digit million pounds in the newest additions to the portfolio, MissPap, Karen Millen and Coast. At the same time, the more established brands, by which I mean, boohoo, boohooMAN, PrettyLittleThing and Nasty Gal leveraged their cost bases in the year. We delivered adjusted EBIT of GBP 107 million, up 42%, with a broadly flat EBIT margin at 8.7%. Adjusted earnings per share grew 42% to 5.88p, and we finished the year in an extremely strong financial position with net cash of GBP 241 million. So moving on to Slide 7 and our sales by brands and geographical markets. boohoo has seen further strong organic growth with sales of GBP 601 million, up 38% year-on-year. PLT continues to trade extremely strongly with GBP 516 million of sales, also up 38% year-on-year and maintaining strong growth in its key markets. Nasty Gal has been a really strong performer throughout the year. And in 3 years, it's gone from a start-up to sales of just under GBP 100 million. By region, the U.K. has been the standout performer with sales up 39% against the market that we believe in the last year was delivering just probably single-digit percentage rate of growth online. International sales grew very strongly, up 51%, and now account for 45% of our sales mix. Moving on to Slide 8 as far as our operating costs are concerned. In the last year, we've had a very strong performance in the cost base. The main point I'd like to bring out here is that in our more established brands, we've achieved leverage across all our cost lines, marketing, distribution and central overheads. And these gains, we've been able to reinvest into growing the newer brands. Distribution costs delivered 90 basis points of leverage, which is a great performance and reflects gains from our automation solution in Burnley as well as small mix effect from the higher proportion of international shipments and also investments in our services across all of the brands. Central overheads increased 20 basis points as a percentage of sales in the year, which was solely down to the investments we're making in the new additions, MissPap, Karen Millen and Coast. In fact, we achieved leverage on this cost line in all 4 of the more established brands. Roughly on cost, I think it's worth touching on what we think is a real strength and advantage of the business model we have. Within the cost base, there's a high degree of flexibility, and we're able, where necessary, to take quick actions to keep costs under control and react to the environment we're in. Whatever challenges that may hold. For example, we have a high proportion of immediately variable costs such as transaction costs, delivery costs and large parts of our marketing spend. So you can adjust that spend very quickly as market conditions suggest. On distribution costs, in recent years, we've benefited from higher efficiency levels and automation in warehousing, such as the solution we have in Burnley. And more generally, we're able to pull back on discretionary spend in an agile manner to keep costs under control. Moving up to look at cash flow on Page 9. We finished the year with GBP 241 million of net cash, up GBP 50 million year-on-year. Operating cash flow remained very healthy at GBP 127 million and strong free cash flow of GBP 81.7 million. That was after investments that totaled over GBP 45 million. That includes infrastructure and operational investments as well as the acquisitions of MissPap, Karen Millen and Coast. Other cash flows -- cash outflows of GBP 31.7 million included GBP 15 million of share repurchases by our employee benefits trust, cash tax payments of around GBP 12 million and GBP 6 million of leased costs. With GBP 241 million of net cash on the balance sheet, the group is financially in an extremely strong position. We have, in recent weeks, analyzed a range of scenarios to assess a range of financial outcomes from COVID-19, and we stress tested our liquidity position to allow for extreme downside scenarios. From this, we believe that our flexible cost base and ability to move quickly take mitigating actions to manage costs. We have a low level of cash burn in our worst-case scenario and still have significant financial headroom in the balance sheet. Moving away from costs and cash flow and on to KPIs on Slide 10, I'd now like to talk about how customer engagement improved in the last financial year. From a customer perspective, key metrics continue to show the excellent progress we've been making as a group in the last few years. And these KPIs show that we continue to move in the right direction with significant gains in customer growth and spend per customer. With almost 14 million unique customers at the group level after adjusting for customers who spend with more than one of the brands in the portfolio, our multi-brand strategy is allowing the group to engage with more customers, and they're shopping with us more frequently and spending more with us each time that they shop. And so this is driving significant gains in the share of the customers' wallet with a 5% increase in order frequency and a 6% uplift in average order value, driving an 11% increase in sales per active customer in the year. And that's on the back of double-digit increases in sales per customer in previous years. But this loyal customer base is important when we're thinking about customer churn, which we can show a chart on Slide 11. That progress in customer acquisition and engagement is clear here on this chart, and it showed how much our customers spent with us in the last 6 years broken down by cohorts based on the year of acquisition. You can clearly see the growth that we are achieving is being driven by a mixture of an incredibly engaged and extremely loyal customer base as well as new customer acquisition. What we're particularly pleased to see when we examine the chart is that we're seeing growth in spend from the cohorts in years 3, 4 and 5 and even year 6 after acquisition of the customers. Our value churn has remained static year-on-year at low double-digit percentages. And for us, this is really pleasing when considering higher-growth areas in the business, such as Nasty Gal and newer international market. These have a higher churn rate, becoming more significant in the group. So to some extent, we're not showing the underlying improvements that are being made in the more established markets and brands. Lastly, on Slide 12, I'd like to talk about how our outlook, which is to say is set against an unusually uncertain backdrop would really be quite an understatement, but I can tell you what we have seen in the relatively short period of time since the COVID-19 pandemic came to the fore. We finished the financial year in great shape and with strong trading momentum, having seen sales grow 47% year-on-year in January and February. In the first 2 weeks of the new financial year, FY '21, this trading momentum was maintained. Then since the middle of March, trading has been mixed as a result of the impact of the COVID-19 pandemic, initially with a marked decrease in year-on-year growth. Performance has picked up in more recent weeks, and we're now seeing improved year-on-year growth rates of group sales during April. We've moved extremely quickly as a group to best manage our inventory and costs. But at this stage, we believe it's too early to give financial guidance for sales and EBITDA for the current financial year. But we remain cautious on the outlook due to the uncertainty from the COVID-19 issues as the factors going forward. With that said, we're very confident in the strength of the business. We have an incredibly strong balance sheet with GBP 241 million of net cash at the year-end. And our operating model is highly flexible in terms of both sourcing, our operations and also in terms of our cost base. So on that note, I'd like to hand back over to Carol now who's going to take you through our multi-brand strategy and current trends that we're seeing and responding to. Thanks.

Thank you, Neil. And if we turn to Slide 13. So clearly, the past weeks have been demanding, and they presented us with many new challenges that we thought we'd never have to face. Today, I'd like to cover how our teams, our brands, our customers are responding towards a very extraordinary time. I'm incredibly proud of our teams across all our brands on how quickly they've adapted to their new working conditions. They're still producing great content. They're making sure we have stocks available. They're getting parcels delivered. And they're keeping customers engaged and entertained through what is a very difficult time for everyone. I'll start by turning to Slide 14 to see what we've been doing across our brands. So we covered a lot of this off of September, but we have 7 great brands now across the group. We've had a fantastic year for our established brands, boohoo, boohooMAN, PrettyLittleThing and Nasty Gal, and added 3 new brands, MissPap, which has just been under our umbrella for just over a year. And we launched Karen Millen and Coast last October. And I've talked a lot in the past about the marketing position of all our brands. So it feels more appropriate that I cover off what the brands have been doing in recent weeks to react to the COVID-19 situation. All our brands have a social media presence. We've talked a lot in the past about how our social channels are an important part of our communication strategy and how much time our customers spend on social media. And throughout what has been a very challenging few weeks, these channels have played a huge part in communicating with our customers, entertaining them and bringing them some uplifting content into their homes. At boohoo, we launched our #boohoointhehouse campaign. Some of the images you'll see in our gallery today are models, influencers and actually some of our own team who are shooting products on themselves in our own homes -- in their own homes. We're also -- we are then encouraging customers to tag those outfits that they're wearing through the boohoo hashtag to enter competitions to win new wardrobes. The competitions are endless. They run daily. And they're anything from cash prizes to giving away virtual hand party boxes. And over the Easter holiday, we run in many virtual festival with 4 acts live on Instagram. At boohooMAN, we launched a new activewear range and released workout videos. We have also just launched our second collaboration with Quavo, an online competition to win the collection. At PrettyLittleThing, they launched their #StayAtHome with PLT with live DJ sets, Bongo, Bingo and yoga classes. And on Easter Sunday, they launched their PrettyLittleThing influencer awards, which was streamed live on Instagram. At Nasty Gal, our Californian brand, it goes from strength to strength across many markets. And in recent weeks, it has a real focus on working-from-home wardrobes. We've been sharing what our own teams are wearing in their homes, and we've been working with influencers giving styling and beauty tips. On Instagram, we've been streaming live meditation and pilates classes as well as live DJ sets. MissPap has had a glossy new relaunch with a striking new logo, app and web redesign, also engaging with customers with MissPap StayAtHome home and dressup hashtag with lots of competitions to win new clothes, always looking your best even when you're staying at home. Karen Millen has been increasing collections weekly with a strong bias towards workwear and investment dressing. And in recent weeks, we've launched the KM Guy to working from home and Karen's cooking now. And in Coast, we introduced the whole supply chain, a brand that indexes highly in occasion wear. We've been working towards the introduction of new categories and seen some good early reactions. With the absence of occasions to go to, Coast is being given date night in picks across social as well as self-care stories on Instagram. So turning to Slide 15 and looking more closely to our newer brands, I wanted to highlight the speed in which we acquired and integrated them onto our platform. There are some impressive stuff, which just show how quickly our teams are able to adapt to new ways of working and the amazing flexibility of our supply chain and its incredible speed to market. MissPap was a record. We went through the purchase, and we launched the brand with new inventory on our own platform in just 5 days. On Karen Millen and Coast, following the acquisition last year, it was only 8 weeks to relaunch, plugging in a whole new supply chain and new collections and turning what was once a 9-month lead time down to 6 to 8 weeks. And since then, we've been building on those collections. With Karen Millen, we acquired a new customer and extended the group's selling price points with real investment dressing, pieces that will sit in your wardrobe for a lifetime, and we've named them our Forever Pieces. In autumn/winter, we were selling some of our shearling coats at a price tag of GBP 1,000. And with Coast, we're extending the collections beyond occasion wear for a more relevant future with a focus on modern femininity and again having plugged in a new supply chain and reduced lead times by many months. From acquisition, we have already increased the size of the collection by 150%. I'm now turning to Slide 16. We wanted to share some of the insights into how our customers are responding to the current crisis. Well, I've mentioned how much they are engaging with us and all our brands. And ultimately, their behavior hasn't changed too much. They're still loving fashion and beauty. So we are working with thousands of influencers across our brands to bring them the very latest styles and especially the stay-at-home looks. They are on social media more than ever. And looking at metrics across social channels, we can see an increase in our likes, our shares, comments and reach. And just in the U.K., last week, as a group, we reached first place. So now I'd like to share with you a short video. [Presentation]

So you can see how behavior has adapted to the conditions we face today. It isn't all about celebrity and getting ready for Friday night drinks and the latest festival. As our customers have adapted, so have we. We've rolled out change very quickly to meet the new demands of customers. Hoodies, joggers, activewear, nightwear have been amongst many of the bestsellers in recent weeks, replacing party dresses for the Easter weekend. We have benefited from our short lead and varied supply chain. Our test-and-repeat model has served us well. And we have adapted our supply chain amidst capacities around the world at different stages to meet the demands of new trends that working from home has given us. And of course, we want to do the right thing and look after our frontline workers at the National Health Service. We launched our NHS heroes range across our brands with different designs for each brand, and all the proceeds will be going to the NHS. And now we're very proud of our wider initiatives to support the NHS and our local communities. The group is now utilizing our supply chain to make scrubs, gowns and masks due to be donated this week. We're also donating clothing for our NHS workers, the simplest of things that made us source, like socks and tights and T-shirts. And for those families unable to visit their loved ones, tablets for video call so everyone can stay connected. And a final word from me as we say on Instagram: take care, be kind and stay connected. I think that summarizes our group culture as we stay connected, take care of our teams, our customers and our suppliers. Thank you. And I'll now hand you back to Neil.

Thank you, Carol. So this last section is focused on giving a bit of a business update on the markets we operate in, on sustainability and also an overall summary before we move on to Q&A. On Page 18, the markets we operate in. This table is something that you'll be familiar with from recent presentations. And we thought it would be helpful when putting into context the size of the boohoo group today in key markets that we operate in, the size of the clothing and cosmetics markets in key regions and the market share we have today versus 12 months ago. The key takeaway from this page is that we are a relatively small operator even in the U.K., our largest market, where we turned over GBP 679 million last year. Our market share is just 4.6% of the online market. And when you think of the overall clothing in cosmetics market, both online and offline, it's less than 1%. In the last year, in the U.K., we've added 1 percentage point of online market share, but we still feel there's so much more to go for. And with our pure-play business model and multi-brand strategy, we're definitely in the best place to capture further market share gains as the structural shift from offline to online continues. Looking at this internationally and our key regions, Europe and the U.S. We've seen significant growth in the last year. That's around 60% year-over-year across both of those regions. But added just 0.1 percentage point of market share, and we sit here today with a 0.4% share of the online market. Again, this just goes to demonstrate the size of the opportunity for us as a group and the significant runway that we can see for future growth. Turning to Slide 19 and sustainability. We wanted to look at this in 2 areas: firstly, about what we've been doing; and then also, we'll talk about our future plans. So in terms of what we have been doing, in the last 6 to 8 months, we've worked to identify the right partners to help us on our sustainability journey, signing up to 2 internationally recognized initiatives in particular. The sustainable clothing action plan will help us with our focus on introducing more recycled products into the mix. This will extend beyond our -- for the future capsule collections that we successfully rolled out last year and into our main range products where we can start to drive a real change in the quantity of recycled materials that we offer. Secondly, the sustainable apparel coalition. We signed up to as a signatory in March 2020. Over the next 12 months, we'll be required to take our largest suppliers through a sustainability assessment to help us and then fully understand their environmental and social impact. Elsewhere, we are working with a specialist partner to help us look at our carbon impact, support to our carbon reporting and help us set our strategy for reducing that carbon impact. Lastly, we're focusing on a detailed and comprehensive supply chain mapping and auditing exercise with a collaborative partnership between our own internal audit team and a third party. This will focus initially on our U.K. supply chain, but we'll then look to roll out across all our international suppliers in the future. So as you can see, there are a number of areas and initiatives that we're working on as a group and we're investing into. And you can be sure that we'll keep updating you on all of those initiatives and progress in the future as we continue this journey. Moving on to Slide 20. We wanted to touch on our suppliers and what we're doing as a group right now to best help our suppliers at the time where there's been a lot of noise about the clothing industry turning its back on them. boohoo was founded on supply chain relationships, and we're very much aware that suppliers have been critical to the group's success today. Whilst we have a diverse supply chain, which helps reduce our exposure to a particular supplier or market, fundamentally, our supply chain is the lifeblood of the business. Many of our suppliers are small businesses supplying not just ourselves, but also a number of companies, and they're dependent on regularity of orders and critically on cash receipts. And our approach has been to stand by our suppliers. We've made sure we're honoring orders and not sending goods back. We're not demanding discounts. And we're ensuring that we are maintaining our industry-leading payment terms such as the 14-day payment terms for U.K. manufacturers that we rolled out last summer. Doing this, it's not only the right thing to be doing, but we believe that the actions we take today to help suppliers out where there's near-term uncertainty is going to help the group secure and foster long-term relationships with those suppliers who can, in turn, share in the success of the group as we grow in the future. So in summary, on Page 21, notwithstanding the difficult global backdrop today, the boohoo group is a fast growing e-commerce fashion business. Revenues last year were more than 10x that we achieved in 2014 when the group IPO-ed. We have a proven test-and-repeat model. This allows us to react quickly to trends that emerge. And as we've scaled, we scaled up our supply chain along the way, and we'll continue to do so. We have a strong financial discipline within the group, helping to build up a track record of delivering profitable sales and EBITDA growth whilst continuing to invest heavily into our brands, our infrastructure and our operations. We want to build trust and transparency in the group with an ever-increasing focus on ESG topics that matter to all of our stakeholders. We also have the financial robustness to deal with the near-term challenges posed by COVID-19 with a strong balance sheet and significant liquidity. As I mentioned earlier, it's too early to give detailed financial guidance for fiscal year '21. But sales have remained positive for the first 7 weeks of the financial year, and that gives us further confidence in what we believe is a winning proposition with a platform that's well positioned to capture significant market share globally in the future. So thank you very much. That's it for the presentation. So let's move on to the Q&A section. [Operator Instructions] Okay, do we have the first question?

Thanks, Neil. And first question is from John Stevenson at Peel Hunt. The first question, how would you plan to trade summer given the potential for a difficult market backdrop? And the second question, can you comment on the current stock position versus last year and how your test-and-repeat model allows you to adapt to the current demand conditions and the potential volatility ahead?

Okay. I think I could take that, if you like, Carol, about trading, but maybe you could add a bit on the -- what's going on in the product portfolio. But I think we plan to trade summer through all this uncertainty in the way that we've always traded, and we'll have lots of new products coming through. You can see from what we've said about the last few weeks that we've traded very well in the circumstances. So I think we won't have residual issues in our inventory. We've been very agile in the way we handled that. But the summer is going to be very uncertain as to how lockdown -- how long lockdown is going to go on in different markets and also what happens when lockdown restrictions are hopefully released gradually. And we know that others out there will have plenty of stock that they'll want to clear through the channel. But for us, I think we'll compete as we always do on great value, but lots of new products coming through and a great product range. And so hopefully, that will standard in good stead against the competition. But obviously, I think the market conditions will be different than what we've ever seen. But I think it kind of goes back to our agility and ability to be able to react to that. So we feel like we don't really want to comment on the future that much given the uncertainty, but we're well placed to cope with it.

Yes. Neil, I'll just add a little bit of color to that on product. We're already seeing a shift into lighter weight currently from the heavier jog suits and stuff that we were selling just a few weeks ago. So we're already seeing demands are changing with the warmer weathers that we've just had. I think it's important to add because we're global in our sales, we're getting different sales mixes around the world. What we are doing, because we have an agile supply chain, what we do, do is we're sampling all of the time. And because where you've got our test-and-repeat model in place, when the consumer trend changes, we can -- we're able to place those orders alongside. So if suddenly things open up, we'll be ready with our vacation wear collection, but we don't really have to put all those orders down today. So we can play everything very, very close to the market and be extremely agile within our inventory.

Okay. Next 2 questions...

We have the other question on stock positions. Okay, so I'll deal with that one first. So it's from John at Peel Hunt. And the current stock position versus last year, I think we're not going to give out details of the exact position. What I would say is that we've been -- as we've talked about and being very quick to react on inventory, so with the way the supply chain has evolved in different sourcing markets, we've been turning the stock even more quickly than we ever do, if anything. And so we're seeing growth, and we've got a lean stock position. I think going back to the question about what the potential volatility ahead with that very lean stock position, we're in a good place to be able to fill open supply, which is what Carol just talked about.

Okay. 2 questions from Eleonora at Stifel. What do you think gross margin investment could look like in the first half? And secondly, what has driven the year-on-year increase in inventory?

And so on that question about gross margin investment in H1, again, I think it's really hard to deal with that kind of uncertainty. And what I would say is that we've seen fairly stable gross margin so far, but that could change as lockdown restrictions are released. So it's really difficult to predict that, and that's why we're not giving guidance on those type of things. And then the other question, the inventory increase in the last financial year has been purely around business growth. You can see now the numbers for January and February where we were finishing the year up 47%, and then we were building stock to cope with that growth. And then you can see what I've said about, since that period, we've been able to cope with those stock levels at the year-end in spite of a temporary dip in demand, if you like. So I think that's where we are on that.

Okay. Geoff Ruddell at Morgan Stanley is asking, you finished the year with an accruals balance of GBP 99 million. How -- what do these accruals relate to? And can you shed any color on them?

So those are accruals of just costs -- normal business costs. So within that, you'd have stocking in transit accruals and stock that we received, et cetera. So if you compare that to the trade payables balance of just over GBP 30 million, you can see that, within that GBP 99 million, we've got a normal level of accruals for the inventory coming through as well as all our other business costs, the cost that we pay to logistics businesses, our warehousing costs and our IT investments, et cetera. All of those accruals are in that balance. And actually, it was a fairly normal level of increase in accruals of 21% versus the revenue growth that we've been seeing of 44% year-on-year.

Okay. Wayne Brown at Liberum, 2 questions. How do you think about the medium-term cost base for the business? Are there any areas where you might need to rightsize? And then secondly, in terms of supply chain, is there a risk of manufacturers coming under pressure if market conditions persist? And are you concerned about supply chain shocks across the group?

I mean the medium-term cost base, we're not looking at resizing any areas of the business. I think the recent weeks have been quite enlightening, and I think what we'll do is just try and look at the way the operation has functioned during the period. And again, we've been really proud of the way people have responded. And it gives us some insights to where we could be as efficient as possible in the future. So from one of the silver linings from that could be there. But obviously, it's been a very limited and unusual period that we've seen. So nothing that gives us any fundamental thoughts on the medium-term cost base. And is it an opportunity to come down your authority in your key segments, which is the second part of that? There's obviously an opportunity here to take advantage of the fact that customers can only shop online at the moment. And we obviously try and engage with those customers as best we can during this limited period. And of course, I think we have seen customer acquisition quite strong through the lockdown period in that respect. The next part of the question, will manufacture still...

[indiscernible]

Yes. Yes, I'll hand that over to you, Carol.

Yes. So on the supply base, I mean, obviously, we've had a lot of shakeup and change in supply from the beginning of the year, certainly from the end of Jan, with China being the first to close and then many other countries have followed. I bring this back forward to our agility, just being able to move production around where factories are open. So when we were faced with China closing, we have sources elsewhere, we were able to utilize. And as they've closed, China has reopened. So we have such a huge set of -- a huge inventory across all our brands, and tens and tens of thousands of different options that are produced around the world. And we have an ability to move that capacity to a country that is opened. But obviously, supply is under strain at the moment while it's under lockdown.

Okay. David Holmes at BAML, asking if we could give any more color on recent trends and any changes in terms of performance by region. And second question on current trading. Has growth remained positive during March? And is there any context that you could give around the level of growth?

I presume that means current trends in trading, et cetera. I mean we can't give much more than what we've said. So we saw what everybody saw, which was a change in customer demand. For us, that did lead to a marked decrease in year-on-year growth. But then, since then, we've seen a resurgence and an increase in that growth. And then differences by region, I think a lot of countries have followed similar patterns actually where you see a very immediate downturn. But then as lockdown continues, people do start spending according to the different situation that they're in. But it's very anecdotal by country, but I'd say similar pattern. Has growth remained positive during March and any context around that. I think you can tell from that, that we saw positive growth in March. But we're not going to provide any context around that. I think we're 6 weeks into the quarter. There's still a long way to go in the first quarter, let alone the rest of the financial year in very uncertain times.

Okay. Next question is from Anne Critchlow at SocGen. Can you give any comment on brands that have been most resilient since mid-March?

I think, what you've seen is all the brands have been resilient in different ways. And I think, overall, the most resilient brand has been boohoo as a brand because -- and that includes boohooMAN. boohooMAN's been extremely resilient, but so is PrettyLittleThing, even -- I think it's harder to comment on the other brands. You've seen Nasty Gal be resilient in the U.S. So it's been quite well spread across the brand. I think that's one of the real positives of having the diversification of the multiple brands. They've all got pretty broad offerings, and we've been trying to broaden the offerings for all the more younger brands, and that's also been working through lockdown as well.

Okay. Another question from Stifel. How are you seeing clothing prices hold up following the end of the new year with increased discounting?

I think we -- I mean, it's pretty hard really to comment on clothing prices overall. We've seen our prices hold up, but we've been obviously also stimulating the business with great offers as we always do. So we've not seen big fluctuations in prices since, really, February and March.

Tushar at Goldman Sachs. He's got 3 questions. Firstly, in terms of trading in the fourth quarter. Geographically, you saw an acceleration in Europe, but a slowdown in the rest of world. Is there anything you can comment on there? Second question, are promotions being increased to attract customers? And lastly, can you give any color on CapEx for FY '21?

Yes. On the regional performance, we've been really happy with the performance across the regions with -- and across the multiple brands. In Europe, we did see an acceleration, and I think that has to be the case that we'd like to see that we've got -- back in the presentation, you saw that we're so small in those regions. And I think we've -- more of the brands are opening up their offering to more European customers, and we've seen that. In the rest of the world, a slowdown. I think that was on the back of the final 2 months of last year. We're actually very positive in certain Southern hemisphere countries. And I think the slowdown there, if you can call it, that is a little bit just around the success that we had in January and February in kind of Australia in that region. With promotions being increased to attract customer, if you look across all of the brands, the answer to that is now that we're seeing kind of normal levels. And all of the brands trade independently and just try to make the most of the demand that's out there. And we've not really had an increased level of promotional activity, but we -- as you know, our business model does have a significant level of promotional activity in it and that's been the case through the recent period. On CapEx for '21, financial year '21, I mean, maintenance CapEx and what we want to do to accomplish to equip as we get beyond where we are today with COVID. That we've got 3 projects that are absolute priorities for this year, and that's the next phase of automation in the warehouse in Burnley and also the Sheffield expansion, beginning the automation project in Sheffield. We've not given guidance for the year because within the plans, there's quite a bit of flex around how we time the spend. So I think we'll see those CapEx projects proceed, and the CapEx will actually be higher than it was in FY '20. But we'll update you on that as we go through the year. But we do have significant liquidity and availability to complete those projects during this year or start the automation in Sheffield and wait the others.

Okay. Next up, Ben at Investec has 2 questions. Firstly, can you comment on why April is better? Is it from existing customers or increased acquisition of new customers? And secondly, what will be your plan for marketing spend in the current period of volatile trading?

So again, if you look at April, it's very recent. And to look at what's causing the upturn that we've seen is difficult to comment on. But we have seen some decent figures in terms of customer acquisition. And again, it varies by market. But I think what you're seeing there is that customers are no longer able to shop on the high street, so you'd automatically expect an uptick in customer acquisition relative to the size of the overall market. But our existing customers are -- we are seeing that momentum that you could see from the cohort charts is standing. It was in good stead, I suppose. That's the answer I can give at this point. And then plans for marketing spend in the current period of volatile trading, we would -- that would, overall, be the same as we always do, which is to try and engage with our customers in the best ways that we possibly can. And obviously, there'll be some more relevant marketing channels right now than what they were when everybody was out and about. And probably Carol can comment on more specifically that.

Yes. I mean there is -- obviously, we ask for marketing, but there's a shift. Obviously, some of the channels that you are used to seeing, out-of-home advertising, lots of TV, lots of those brand awareness channels, we're doing less of that, and more around the digital channels and really where our customers are. So it's getting to pop-ups and whatever on their mobile devices where they're shopping today. So -- but it is -- it's just a channel shift. It's not anything that we weren't doing before. But I think what we're [ seeing ] more recently is lifestyle kind of marketing as well and very much engaging marketing to the current -- to react to the current situation.

Okay. Charlie at Exane is asking have you seen any constraints in airfreight capacity or increased costs recently.

So quite a number of our shipments go on -- or used to go on passenger planes. And therefore, we've had to be agile in terms of reengineering those supply chain and because the passenger planes have stopped more or less, so we've been switching them over to cargo planes. And that's where -- that has inevitably been just because of supply and demand factors, some increases in costs on that. But then nothing to be concerned about. Given what we're going on, our priority has been keeping those service levels to customers all over the world. I think we've done a good job of handling that.

Okay. Simon at Numis. Can you elaborate on additional costs that fed into the other admin line as the step-up in H2 looks to be quite significant.

Again, I think that's just been around the investments in the new brands. So what we've seen on that cost line in the established brands is that we've been able to continue to gain operating cost leverage. So we had some one-off costs around the new brands that came in, and that's really the only major factor in that. So there's not been any big investments in the more established brands, more around growing the new brands.

Okay. A question from Alvira at Barclays. Peers were suggesting mid- to late-March revenues were down 20%, 25% year-on-year with April up 5% to 10%. Are these the similar types of magnitude of demand swings that you've seen?

Thanks. Well, we've not seen revenues mid- to end of March down as much as 20% to 25%, and you can -- whether out from what we've said about the outlook. It's too early to comment on April year-on-year to date, but we have seen an increase in the growth rates. And you probably put that 5% to 10% year-on-year more in the mid- to late-March area, and then we've seen an -- a bit of an improvement since then. Of course, it's very early to comment as to how the accounts are going to look when we close the books. So too early really to say or anything other than we've had positive trading year-to-date.

Okay. Next question. We've talked -- you've said that recent events have highlighted boohoo's key strengths. What are these? And how have you been able to use them to your advantage?

Over to you, Carol, for that one?

Yes. I think this word crops up again and again, and it is about agility, which is our key trends in agile supply chain. I -- we've had lots -- the major recent event is obviously what we've had to deal with, all of us have, have to deal with in the U.K. and around the world with the COVID-19. So what we've been doing is obviously just applying our very strong skill set, and that's one of inventory at the right price and managing to put everything in place very, very quickly. As I mentioned in the presentation, from teams working at home, to shooting at home, to putting social distancing in place in our warehouse, to maybe -- to keeping our service levels up and still being able -- which has been a major strength. We talk about our clothing and our great fashion, but actually a major strength that we have shown -- where we've shown a lot of agility in recent weeks has actually been able to get the goods into our DCs and out again to our customers and working with our global partners.

Okay. Alvira at Barclays, could you comment on international warehousing?

I don't think there's been any change of our thinking on that, that we are being able at the moment to service our customers everywhere in the world in -- to a level that we're extremely happy with. But we foresee in the future that we're going to look at the options for international warehousing. That's where we've got to previously, and that certainly hasn't changed in the last 3 months.

Okay. And 2 questions from Charles Allen from Bloomberg Intelligence. The -- are you seeing any changes in conversion or returns rate? And do you envisage bringing any more IT and software development in-house?

Conversion rates have been variable depending on what's been happening in lockdown in different markets. So you kind of see a browsing behavior and a decrease in conversion, and then it has got back to more normal levels. And then on returns rates, we've seen a very big shift in the type of products that we're selling, which generally have lower returns rates. But we're also seen that customers maybe having more difficulty with returns processes. So we want to give them a bigger window. So we've extended our window on returns rates. So overall, looks lower, but we -- that could change going forward. Any other software development in-house after the app development? No. I mean, I think, generally, we've been taking our apps in-house across the brands, and we've seen a good response to that, but there's no areas that we're going to roll that out to at this point in time.

Okay. Next up, Matthew from Nplus1. Roughly, what cash outflow could you envisage by supporting suppliers with faster payments in the emergency funds? And has the business borne extra costs in warehousing and distribution to align to protocols?

So on the supplier side, we already have the industry-leading payment terms, and they've been designed to make the supply chain efficient. So that has continued through the drop in demand that suppliers have been seeing. And so there's not a material amount there where we have to help suppliers through the emergency period. And actually, most of them have found that it's in a quite short period of time where they've seen disruption, and we've been able to help them through that just from a -- on the normal trading terms. On the warehouse distribution side, we have seen that there are some inefficiencies around what's been going on. So incorporating social distancing in the operations and making those -- making sure those operations are completely safe hasn't been as costly as you might think. Because if you look at our operation in our distribution centers, there's a lot of space in there. So in Burnley, we've got 2 million square feet, and we have about 400 or 500 people in that building at any one time. And so there is a lot of space there. And -- but it's been more around -- so the costs have been more around making sure the processes are really compliant. And then there is some additional cost to making sure that the management and supervision in the operations are able to make sure the compliance with the new processes. And -- but it is -- in terms of -- if you look at our efficiency year-over-year, we've not seen a massive degradation at all because this time last year, we were just going live with the automation in Burnley where we saw a disruption value there. So -- but there have been some additional costs. I think you've also seen higher levels of absence in our business generally, and I'm sure this is through the world over, if not throughout the country. So that, as we've been supporting all our employees by having them on fully paid through the full isolation period, I think that you're inevitably going to get some cost to come through that. And I think that's the answer to that question.

Okay. Last few questions now. Alvira at Barclays. Could you just comment on the distribution costs and the split between fixed versus variable?

So what I would say is it's just a low proportion of distribution costs that are fixed. But on the last mile cost, that's a significant portion of our distribution costs, which is over 50%, close to 60%.

Okay. Caroline at Jefferies. Would you be interested in acquiring any other brands, online operations if opportunities presented themselves?

I think we're in the same mode that we have been in, where we have significant cash reserves, we're able to look at opportunities as they arise. Our priorities in the most recent weeks have been, number one, health and safety and well-being of our operations and our employees as well as everybody that we know in the supply chain. And -- but we're in a good position to be able to consider any opportunities that come up in the coming months.

And Szilvia at Crédit Suisse has a couple of questions. Could you comment on how you're working to protect the image of the group in the current environment within the mix of social distancing? And secondly, could you comment on customer acquisition costs in the current environment? And how sticky do you think those customers could be when the lockdown is lifted?

Yes. So from an operational point of view in the warehouses, the government has been very clear that online operations are very important for the economy as we go through this crisis. But the #1 priority that I'll keep stressing has been the -- making sure those operations are completely safe. And I think what we have done is completely reengineer our processes from an early stage of this very quickly. And I think that's helped us maintain our service levels through this process. But what we have been doing, as Carol talked about in the presentation, is working with local government in Sheffield and Burnley in terms of counsel management leaders as well as the local MPs to make sure that everyone can see that the operations are functioning safely and effectively. So we have been very transparent about that. We've also been working with bodies like the environmental health office, and both Burnley and Sheffield have had inspections during the last weeks. And then we've been comparing our -- the processes that we reengineered to with the British Retail Consortium guidelines that came out recently. They came out after we had already made the changes, and we basically compared the processes that we have to those guidelines and found them to be fully compliant. And so I think we want to be very transparent about it. We've liaised with whoever has got a vested interest in it. And I think our priorities have been the safety of our employees and also preserving jobs in the economy. And so I think that's the way we've addressed that. And so that is the -- oh, yes, sorry, the second part of the question, the color on expected customer acquisition costs. We have been continuing to deploy our marketing spend effectively -- as effectively as we can through lockdown. But I wouldn't expect any major changes on customer acquisition costs, although it has been a little bit too shorter time period to comment on that. What -- but we would say that the customers that we've acquired in the period, we obviously hope that they've been as impressed by the proposition as all of those cohorts of customers that you've seen in the chart in the presentation. And I wouldn't expect them to be any less sticky or more sticky than the customers that we acquire generally, and that's based on our proposition. And hopefully, our superior proposition with lots of new products always within the website. So I think that's why I can answer that question at this point in time. So that was the last question. So I'd like to thank everybody for joining the meeting, and -- but I'm going to wrap up the meeting now. So thank you very much, everybody.

Thank you.