boohoo group plc (DEBS) Earnings Call Transcript & Summary

[Audio Gap ] Q1 update conference call. At this time, I would like to turn the conference over to John Lyttle, CEO. Please go ahead.

Good morning, everyone, and thank you for joining us today for our Q1 trading update call. I'm John Lyttle, Group CEO, and I'm joined this morning by Neil, Carol and Mahmud. I'm going to take you through our Q1 trading update, which we released this morning and update you with progress made on our strategic priorities for the year. We will then open up the line for any questions. So on to the results for the period. Revenues totaled $446 million, which is down 8% year-on-year, both in line with prior guidance as a result of tough comparatives, continued international service challenges and the annualization of higher return rates on year due to the significant change in product mix towards higher returning categories such as dresses and going out. Gross demand growth remained positive versus strong comparatives, up 9%, while net sales continued to be impacted by the normalization of returns as previously mentioned. Looking back over the last 3 years, revenues have grown an impressive 75%, reflecting multiyear market share gains across the group's multi-brand platform. Encouragingly, in the U.K., we saw an improvement in performance month-on-month with a return to net sales growth in May. Gross demand remained strong in the period with growth of 21% as our product, pricing and proposition continues to resonate strongly with our customers. Performance in the U.S. continues to be affected by delays to delivery, and we have yet to see any relief in terms of delivery times, which remained significantly longer than pre-pandemic. However, we continue to progress plans for our new U.S. distribution center, which will transform the delivery proposition with next-day delivery to key markets and 2 to 3 days for the rest of the U.S. The U.S. remains a key international focus market for the group, and we have delivered sales growth of 85% over the last 3 years. And with the DC, we're investing into the long-term growth opportunity ahead. Sales were down 9% year-on-year in rest of Europe and up 15% in rest of world. Our wholesale partnerships have contributed to performance in these regions, driving increased sales and brand awareness across existing and new geographies. Gross margin was 52.8%, down 220 basis points year-on-year due to the exceptional level of full price sales that we have achieved last year towards the end of the lockdown period. Pleasingly, it is up 240 basis points versus the second half of financial year '22 as inventory has been managed more tightly, and we have made great progress on mitigating inbound freight cost pressures. Moving on to our strategic priorities. With our full year results last month in May, we outlined a series of strategic priorities focused on optimizing our operations to position the business for a strong rebound as pandemic-related headwinds ease. I'm pleased with the progress that we are making towards these, which is having a meaningful impact on the group. We have continued to increase sourcing from nearshore markets, leveraging the flexibility that we have in our diverse supply base to reduce lead times and exposure to inbound freight costs. We've seen a 10-percentage point increase in short lead product mix compared to the same time last year, with plans to increase this to 60-40 split through the rest of the year versus 50-50 in Q1. Inventory has been managed more tightly with a reduction in stock since the year-end and stock turn improving through the quarter. Overheads are being managed tightly despite significant external inflationary pressures and will continue to be managed tightly as we continue to scale the brands, we have acquired along with a focus on driving marketing efficiencies. And finally, we continue to progress 3 strategic projects, with the Sheffield automation project on track for completion in H2 of this year. On the U.S. distribution center, which I mentioned earlier, we have secured and signed a lease on a facility in Elizabethtown, Pennsylvania. This will allow us to progress our plans ahead of launch in mid-calendar year 2023, supporting our international growth ambitions and transforming the customer proposition in a key focus market. Our wholesale operations continue to scale with meaningful contributions to Europe and rest of world sales. We have also launched with a new U.K. partner in the quarter with more planned later this year. Moving on to guidance for this year, where our outlook for the year ending 28th of February, 2023 is unchanged. As a reminder, revenue growth for financial year '23 is expected to be low single digits, targeting a return to growth in Q2 and performance improving in the second half of the year as the group annualizes high return rates and normalizing consumer demand. Adjusted EBITDA margins are expected to be between 4% to 7%, unchanged from prior guidance as the group continues to be affected by pandemic-related factors that negatively impact cost within the supply chain and international competitive proposition, offset by the financial benefits from our strategic priorities and leveraging of overheads. So to summarize, we are making steady progress towards our strategic priorities, and this is having a meaningful impact within the business. These are the key focus areas for the year ahead as we look to optimize financial and operational performance. In the U.K., we have seen promising signs from the sales trends in the period, improving month on month and returning to growth in May. Internationally, we have seen contributions from wholesale partnerships having a meaningful impact, and we are looking at new opportunities in this space to contribute to sales growth and an increase in brand awareness. Our automation projects and plans for the U.S. warehouse are progressing as planned with the former on track to deliver material cost savings and the latter transforming our U.S. delivery proposition. Looking ahead, we are focused on ensuring that the business is well positioned to take advantage of future growth opportunities. And with that, thank you for dialing in, and we'd now like to open the line for questions.

[Operator Instructions] We will now take our first question from John Stevenson from Peel Hunt.

A couple of questions to get us going. Starting with returns, I'm sure you're aware, ASOS was talking about returns being sort of economically driven potentially this morning. Can you talk about your experiences in terms of how you're seeing returns by category, this sort of mix in your view? Or is there sort of more of an underlying macro feel to it? And then, sort of, following on from that, I don't know if you can sort of talk a little bit about product mix and consumer behavior in terms of the other sort of general stats for the quarter and maybe some highlights in terms of brand performance.

On the returns piece, I think we're really seeing it driven by the change in mix of products, particularly year-on-year. So if you think back to the first quarter last year, we were still much of that in lockdown, so it was still highly driven by athleisure, loungewear categories, whereas this year, what we're seeing is that dress mix at and actually above pre-pandemic levels. But actually, the really interesting thing is that even within dresses, we're seeing the occasion part of those dresses much higher. So for us it feels like we had pent-up demand for the last couple of years as people haven't been able to celebrate birthdays, a day at the races, weddings, et cetera, and are really buying quite heavily now into dresses, but particularly into the occasion part of that. So certainly, for us, that's what we're seeing as the biggest driver in terms of returns as dresses historically would have been a higher returns mix in terms of what our experience would be.

And in terms of the general sort of KPIs sort of that conversion basket and so on in the -- and these are the standout brands, I guess, by definition, the more sort of dress, from orientated stuff like Coast and Karen Millen did pretty well in this environment?

Yes. And particularly, you look at Coast had a tough time through the pandemic. Obviously, it's very much an occasion brand, and it's doing extremely well now in terms of its trade performance. And again, that's really, again, right back down to -- you can plan, people are going to weddings, they're going to those days out of the races, all of the occasion, going kind of places that we haven't really been able to do for the last couple of years.

The next question comes from Charlie Muir-Sands from BNP Paribas Exane.

Just a follow-up actually on John's first one. So I just want to clarify, because ASOS was taking out perhaps of an underlying uptick in returns rates even excluding category and other factors, perhaps suggesting that consumers have been setting more back, because they're suddenly feeling their wallet is getting squeezed. I wondered if you've seen that phenomenon either in the returns rates or in the gross sales trends? And the second question relates to your shift into shorter lead time nearshoring. Is that more expensive? Or does that get offset by better markdown control? How should we think about that? And then the third question relates to logistics. You've obviously alluded to significant cost savings from automation in Sheffield. But then next year, you will have that cost base coming in the U.S. How should we be thinking about those 2 offsetting factors just turning together in the timing of that?

Okay. So I think the first one on returns, we -- the big driver in the increase in return rates, the way we read it, is product mix, like John said, the increase in dresses mix. And interestingly, now we're at the point where dresses mix is actually getting similar to last year as we sit here today. So we saw that return rate increase rapidly during Q2 last year, which started in June and then that's continued. So we see that returns rate last year go from 20% in Q1 up to sort of just under 30% in Q2, whereas at the moment, we're fairly consistent on return rates, but they are high at mid-30%. And what you've got there is that change in product mix, the mix of dresses and then the proportion of dress, the higher returning type of fabrics. So it's purely that. There are a couple of other factors. So for us those are great part. And the mix of the brands, which have higher return rates is also more because they're growing faster. And then you've also got things like increasing penetration of premier royalty offerings, which have a returns rate. So that's the more underlying customer behavior, but that's healthy. I think that customers who order with a higher frequency are more of a sense to the mix. So that's really what we're seeing on returns rates. But nothing that we'd say was behavioral if you get compare it to pre-pandemic levels I think. And then Neil do you want to talk about the lead times?

Yes. So in terms of the shorter lead times, Asia, in normal times is still very, very fast for us. So once the goods are made, we can have them back in the warehouse within 48, 72 hours. But actually, those kind of congestion at ports, the continued COVID restrictions, particularly in China, and equally, the cost of freight coming out of Asia, and again, particularly China, is still relatively high versus pre-pandemic. So the short lead time is, obviously, around Europe and North Africa and [ delivery ] truck to our warehouses in the U.K. So from a lead time point of view, we can be much more consistent in terms of the time it takes. Cost is, obviously, much better than freight charges currently coming out of parts of Asia. We're moving out from Asia the products, obviously, that we can resource in Europe for fabric availability makes sense from a cost point of view to have it back here as well. There are still some product categories like shoes, for example, that we couldn't move in the bulk from China, because it's still such a strong sourcing country for that. But we're very close to getting to that 60% mix now from near to home, which is predominantly Europe, and that's going to be great for us, particularly as we go into the second half, where last year, we faced a lot of issues around supply chain and not just cost but around lead time extension.

And then on the last part of the question on the logistics costs. There's a few -- quite a few different pluses and minuses there. So we've got the Sheffield automation coming in later this year, which is a big plus. But then as we go into next year, we'll be getting those additional costs for the U.S. warehouse. So there'll be another fixed cost coming in there. But actually, that will gather the speed pretty quickly, and we'll be able to leverage that fixed cost. And what I would say is that the fixed cost proportion of the warehousing cost is relatively low. The big element is the variable cost. And as we go -- if we get exceptional costs for the U.S. warehouse, we'll pull those out as we always have them when it's a big project that doesn't reoccur like that. But what we also have is that if you think of the distribution network, we've also got 2 U.K. DCs, the more recent ones, that we call them U.K. 3 and U.K. 4, one in Wellingborough, one in Daventry. But we've had quite a bit of inefficiency in our cost base from those, and they will actually get more efficient as we go through this year and into next year. So there'll be offsetting factors there. And then overall, on the U.S. DC, we see a positive, particularly compared to where we are today. So there will be a big positive on distribution costs as a percentage of sales. And then there's an offsetting negative on the import duties that we'll be paying on the -- and that impacts our gross margin. But overall, that should be relative to today where we've got very elevated distribution costs the U.S. customers, and that will be a positive factor next year. So while there will be a bit of inefficiency on the distribution center in the U.S., it's a fairly straightforward manual operation, and that compares in a way to the efficiency that we'll be getting in the newer U.K. DCs. So those 2 things should offset as we go through next year. But it's a big project, the U.S. DC, but we're preparing for it very carefully.

The next question comes from Miriam Adisa from Morgan Stanley.

Firstly, just on the consumer behavior. If you could just sort of walk us through what you've seen over the last couple of months, because Asia is sort of calling out big change in consumer behavior in April. So sort of what did you see in terms of changes from March to April and then April to May and in terms of trading down, how did the trends in the number of items per basket, average selling price? Did you see any changes on those KPIs? If you could just give us a bit more color on that. And then secondly, just on the U.S., if I look at your performance versus ASOS it does look to be a bit worse. So just wondering if there's anything driving that?

On the consumer behavior, we've not seen big fluctuations in the quarter. It's been more around -- we've seen the demand improve as we go into May, particularly in the U.K. So we saw a bit of a trough in the U.K. But that has been more around the lapping of lockdown and reopening. So that's the changes that we've seen, and the big driver for the probably better demand in May. And then as we go through into June, we're seeing that. But overall, on the KPIs, we've seen prices are higher. So we've spoken about the returns and the mix and the impact on returns, that also impacts our average selling prices, because those dresses for occasions are the higher price point. But then on the like-for-like product we've seen in the market generally that you've seen kind of double-digit increases in product prices. So we've seen the higher overall average selling prices. And then that's filtered through into higher basket values. Conversion rates have been pretty similar year-on-year. So when you think of that, it's not really suggesting any kind of that trading down, et cetera, at the moment. And I think that's what we're seeing on customer behavior. Nothing majorly different there.

Well, the last one was on the U.S.A. in terms of trend. I think for the quarter last year, we had seen the stimulus checks, which drove quite a lot of trade, and we had a strong trading period in the U.S. in last year in that quarter. Ultimately, what we're -- and we've been talking about this for a while now, it's just our proposition. We're not seeing any change in terms of our proposition to customers in the U.S. So it's still taking pretty much 10 days to get a parcel from the U.K. over to the U.S.A. The frequency of flights is getting a little bit better. But just in context, it's still just under 40% volume down on 2019 levels. So at the moment, it's still 10 days, which again, if you think our consumer in the U.S. is predominantly sort of that young fashion consumer. So again, for an 18-year-olds kind of looking to buy something for the weekend and having to plan really over 2 weekends, it's just not suiting most of them. So again, back to our focus on getting our warehouse opened in the U.S. in the first half of next year where in key markets, we'll be able to do next day. And in every market, it will be -- within the U.S., we'll be able to give 2 to 3 days as a proposition.

We will now take the next question from Anubhav Malhotra from Liberum.

Just one question on the U.S. performance. I wanted to understand what at the moment you are doing in that market, in particular, to support the performance if you have been doing much marketing and promotion there? Or you pulled back on marketing because you know the consumer offer is not up to the mark? And then secondly, what gives you confidence that the consumer will eventually return because, obviously, they would have been fulfilling their shopping requirements from somebody else at the moment. And to get them to return, do you think you'll have to massively invest in marketing or do some other kind of promotions to get them back? What's your thoughts around that?

I think what are we doing to support performance. We are trying to just optimize that marketing spend and the returns on the marketing spend and the returns on the marketing spend are not what we'd want them to be. So we're trying to optimize that whilst keeping customers aware of the brands before we almost -- it's not a relaunch in the States, but when we go with the new, much better proposition when we've got the warehouse working. And I mean, we're very confident that the -- those returns on the marketing are going to increase massively once we've got the best proposition because that -- and we've seen in the U.K. how well our proposition resonates and has been extremely resilient, all through the pandemic, different phases of it behind, so now we're into a more challenging time. So we're seeing that good performance in the U.K., and that gives us the confidence that as soon as the U.S., we've got that proposition in firing on all cylinders that the demand will come back. And we've seen that in the past as well that the demand is very quick to come back once you got that proposition in the right place.

We will now take the next question from Anne Critchlow from Societe Generale.

I've got 3, please. So the first one is about wholesale participation. Where is it now and where do you think it could get to? And then secondly, on U.K. manufacturing. You've been running your own factory for little while now. So just wondering how you see the role of U.K. manufacturing in the future? And then finally, what percentage of your customers buy with free delivery? And how committed are you to free returns?

Wholesale participation, we've said previously that, that could get up to 5% of sales quite quickly, i.e., during this year. And I think that's where we're on track to do that. It's less than that right now, but I would anticipate that it's pretty much in line with our plans to get up to and above 5% of sales by the end of the year. So you can get a feel for that. And now at the moment, it's just been in Europe and the rest of the world. So you can see the impact it's having on those regions at that sort of low single-digit percent of penetration. So that's where wholesale is. So we're very pleased with the way that's going, and it's on track exactly as we'd said 6 weeks ago. What was a second question?

I'm sorry, Thurmaston Lane, we've always been a huge supporter of U.K. production and jobs in the U.K. And obviously, the speed that offer has just in a couple of hours down the most way to the warehouses here in the U.K. And we're really pleased with Thurmaston Lane, our own unit in Leicester. We're just about to take on the second shift of workers there, and that's been doing great for all brands from Dorothy Perkins, Wallis and right over to boohoo and PrettyLittleThing. So again, that's very important part of our sourcing mix, and particularly in the young fashion brands for those kind of jersey knitted cotton so -- garment. So we'll continue to be a strong part of that business as we go forward in terms of the U.K. And then in terms of the last one, percentage of free deliveries and returns. We always -- whether it's promo on free delivery or whether we're charging for delivery. We charge currently for returns in certain countries. It's something we review on a daily basis as part of our promo activity. And obviously, we are noticing a lot more retailers charging for returns and making announcements on that recently. But we review that sort of daily, weekly as we look at our promo overall by brand.

We will take the next question from Michael Benedict from Berenberg.

I have 3, please. First one, you mentioned the rest of Europe and rest of world wholesale partners. Are you not considering additional U.S. wholesale partners? And if not, why not? The second one is, can you remind us of the key uncertainties or deltas that go to the top or the bottom of the margin range? And then thirdly, on the wholesale again, actually, could you remind us the impact you see on your own website when you launch on a wholesale partner in a particular region? Does the sort of brand awareness provide big tailwind? Or do you see the cannibalization impact offsetting that?

So in terms of the wholesale question on the U.S.A., we are speaking currently to a number of potential partners as we are in other parts of the world. Still partners in the U.K., we're speaking to partners in Europe, partners in India, as an example, so that's an ongoing. And we hope in the next few months, we'll be announcing further partnerships from the U.K. to Europe and other parts of the world. In terms of do we notice when we launched with a partner on our own site, clearly, from a brand awareness, it's great in that point. Do we notice an impact in our own sales? No is the answer to that. We see it mostly as upside in terms of the brand and the overall sales of brand.

And then on those key uncertainties, the delta between the top and bottom end of the margin range. The 2 things there are the gross -- the big ones are the gross margins and the marketing leverage -- level of marketing leverage. So last year, we had 11% sales spent on marketing. If that is down below 10%, and we're at the higher end -- we're more towards the higher end of the margin if it's in line with last year, around 11%, we're at the lower end of the margin expectations. And likewise, our gross profit margin with the -- we'll see how the second half of the year pans out. There's positive signs in the first half of the year as we've been able to turn the stock more quickly and that helps us with avoiding high levels of markdown, but we'll see how the peak summer season goes and then into the second half of the year. But we're expecting gross margins for the second half of the year to be in line with last year, and that would be in the mid part of the margin guidance. If they're a bit higher than last year, then that gets us up. And conversely, if its lower than last year in the second half of the year, I think that would be disappointing because last year we had disappointing sales as we went through Omicron and high levels of returns, and that led to quite a lot of discounting in the final part of the season. So there's positive factors for us to be above the second half of last year. But in the midpoint, the guidance we'd be expecting it to be in line with last year in the second half of the year -- the gross profit margin. Those are the 2 main sensitivities. But then, of course, if you get the sales coming through a little higher than the midpoint of the range, then you start to get some more leverage on the central costs. But overall, we're not expecting significant leverage on the central costs. And there is one other factor that we're expecting deleverage overall on distribution costs because of higher costs that have come through in the second half of last year flowing into this year and generally higher supply chain costs. That could be a little better than we were expected. And again, that would push us towards the high end rather than the midpoint of the guidance. And the final part of the question is about brand awareness when we launched wholesale in a particular region or country. So it's quite hard -- it's quite -- so you don't see a great -- an immediate increase in awareness if you go on a big platform. But there's evidence to suggest that it does help the awareness in markets where we're not so well known. And even in the U.K., it can -- if you've got a platform that's got a slightly different customer base to our core customer base, it can increase the awareness in slightly different customer segments. So there's evidence to suggest that it helps that, so both in the U.K. and in particular, internationally.

The next question comes from Simon Irwin from Credit Suisse.

3 quick ones from me. Firstly, can you just explain why you're more optimistic of better underlying trading conditions in the second half when most people seem to think that the kind of economic environment looks notably worse. The second is, can you just give us a bit of an update around the delivery proposition as you're currently seeing it into Europe and the rest of the world? And thirdly, are you seeing any obvious signs or benefits from Missguided?

On the underlying trading conditions, we're not expecting the underlying trading conditions to improve. The acceleration in the growth, if you like, or the change into growth that we've seen in the U.K. in Q1, we're expecting to continue. And that is, as we've said before, in line with the kind of changes in the demand patterns around lockdowns last year and then the returns rate as well as we saw that increased markedly from this point in the year onwards. So as we lap that higher the returns rate increasing, and we don't have that headwind gone, the conversion of gross demand into net sales year-on-year increases. So we are seeing that start already, and that's why we're confident that, that will change the numbers. But we're not expecting consumer sentiment to get better or anything like that. We're expecting to see that, it's where it is, or if anything, a little bit lower than that. But it's just the way that returns rate, we lap that through this year changes the net sales demand patterns. The second part of the question was about delivery proposition internationally. We've not seen big changes. So whether it's U.S., Europe, Australia, the big thing there is the flights transatlantic and while we've seen positive signs there. And I think it's positive to saying that the U.S. has removed the COVID test, so we should get more passengers flying to and from. But at the moment we're seeing flights being in May were 37% below 2019 levels. So we're still not getting enough capacity in the whole of the passenger planes yet. But I suppose that's positive signs start -- light at the end of the tunnel, but nothing to be impacting us positively in the short term.

Final question on Missguided. Missguided was relatively small, really in comparison to our young fashion brands of boohoo and PrettyLittleThing. So while as a competitor, it was much smaller in terms of sites overall.

The next question comes from Ben Hunt from Investec.

Just 2 questions. Firstly, just on the economics these days of doing wholesale, have it become more favorable since the pandemic? And to what extent are you indifferent between an item being sold via the wholesale channel or via the retail channel, taking into account -- obviously, that's happened with freight and returns on marketing? And then the second question is the funnels you talked about, sales retention was last to last year and that if you could get that back to sort of pre-pandemic levels, then there was a big opportunity. I just wondered in this trading statement whether you've seen any evidence of that and what the mix has been between existing customers perhaps spending more? Or has the performance been driven more by new customers coming on to the site?

So on the economics of wholesale, we're fairly agnostic as to whether we get -- our goods are sold on a wholesale platform or on a more direct freight. And it's that incrementality that we can bring in the -- increasing the awareness incrementally the benefits of wholesale book. The economics are actually -- in a way, they're more favorable because it's just got higher EBITDA margin for us and -- because we're not getting squeezed on price from the partners. Whereas some of those other costs around distribution, et cetera, in the supply chain line with them rather than us on the wholesale. But some of those costs on the supply chain line with us, but we'll be passing that through on price. So overall, we're still fairly agnostic about it. But anything with the pressures that we're seeing on costs in the retail businesses is probably slightly favorable, particularly in the international market. So that's wholesale. And then on sales retention, it's not much different than what we were talking about 6 weeks ago. So the retention -- what we're seeing is the retention in the U.K. still great. And then internationally, we've got those challenges around the proposition. So it's purely from that, which was the theme of what we presented 6 weeks ago. So no change from that really.

We'll now take the next question from Simon Bowler from Numis.

Just with the U.S. warehouse piece now signed. I was just wondering, can you just remind us on kind of which brands, how broad a range and where that product will be sourced from as and when that warehouse goes live?

So in terms of the key brands to be housed in the U.S. warehouse will be boohoo, womenswear and menswear, PrettyLittleThing, Nasty Gal and Karen Millen, they are the brands that we're planning to have there. In terms of the sourcing, obviously, we'll be looking at Central America, though not really thinking much will come from there. Mexico will be good for young and fast fashion, probably something similar to the U.K. in terms of type of products we get here in the U.K. And then we'll look a little bit in terms of North Africa has got good from a GST and duty import into the U.S. But realistically, mostly coming still from the current countries of origin, certainly to start with in terms of what we do there. And then the final part of that question in terms of U.S.A. warehouse. I mean, again, we'll be going live in the first half of next year. So we'll spend the balance of this year, building out the racking, getting the warehouse management systems, taking on colleagues to work there. And then we'll start rolling out the brands from the beginning of next year. And complete by the midpoint till next calendar year is what I would say.

And how do you expect kind of the customer proposition to evolve through that period? Will there be a period where a U.S. consumer will see stock both in the U.K. and the U.S. warehouse while the inventory levels build up in the U.S. warehouse and then they get switched on to just being the U.S. inventory profile? Or how does -- how do things get managed?

I think we'll be looking to -- when each brand gets switched on, the plan will be that they will just see a U.S. inventory, and we'll be ready to go with just the U.S. inventory when we launch each brand. That's the plan as we sit here today. And in terms of kind of range. In essence, the range will be pretty much the same as what they would have seen from the U.K. Obviously, then as we -- kind of in terms of newness in our test and repeat model, that's where the differentials will come in the market. Remember, we've been trading in the U.S. for a number of years, so we have a lot of history, categories, colors, sizes by brands in terms of what that U.S. consumer demands.

We'll now take our next question from Georgina Johanan from JPMorgan.

The first one -- and apologies if I've sort of missed this, been a busy morning. But just around the guidance. Obviously, you've reiterated it, and thanks for the helpful color, Neil, that you shared. I just wanted to make sure I'm right in my understanding that there's been no sort of changes in any of your expectations there in terms of how the consumer evolves over the next few months, external factors around sort of freight and [indiscernible] and so on and so forth. So really, there's -- it's all still very consistent in terms of the shape and so on versus your comments at the full year stage. And that was the first one, please. And second one, you mentioned that you're seeing price increases in the market of double-digit, I think. Is that where we should broadly assume that your level of price increases are? Or have you gone less than that? And then the third question was, I mean, we're often asked about sort of trading down in this environment. I know you said that's not what you're seeing from your existing customers. Are you starting to see any tentative signs of perhaps benefit new sort of slightly higher income demographics coming in to look at the boohoo or PrettyLittleThing brands, et cetera? Any color on that would be helpful, please.

I think on the first point on the guidance is that it's pretty much as we talked about 6 weeks ago. If anything, you'd say, March and April were a little bit worse and then May was a little bit better. And that trajectory coming into Q2 is encouraging from that point of view. And particularly with the U.K. is back in growth despite -- in May -- despite a return rate that was much higher this year compared to last year. So that's the encouraging part. And feeling like you've definitely seen that big improvement from April into May. So that's why it's very consistent. And then all of those -- those other strategic areas that we outlined, we're very much on track with all of those. So that's where the -- we're quite confident about the guidance we reiterated there. On the price increases, I don't know whether you want to comment on that, John?

Yes. I mean, what we're seeing in the market is more around sort of double-digit price increases. We continue to review that on a daily and weekly basis. I mean, where we're seeing the bigger shift in bottom line prices really around the mix in categories. So that dress mix kind of getting back to where it was pre-pandemic versus last year where the beginning of the quarter was still very much around at athleisure driving it. We'll take advantage where we can in terms of price increases. But I think, look, this is going to be a long journey ahead. We're not seeing costs anywhere going down. If anything, that continue to rise. So I think this will just be a continuous review in terms of our pricing, but ultimately making sure that we remain within our competitive set, particularly in the young fashion in the value sector. In terms of trading down, can we see anything on that yet. I think it's too early to see or see any trends there. The biggest trend, as I said earlier, is really a sort of pent-up demand around kind of occasion that people haven't been able to do or planned for the last 2 years. That's still the biggest part. And clearly, we're going in now into the key holiday quarter where, again, we haven't had a holiday quarter for the last 2 years and looking at the travel numbers in terms of numbers of people who are flying abroad for a holiday, it's kind of getting back to 2019 levels. And if we look at categories like swimwear, as an example, even in the last week or so, they're above pandemic levels quite a bit in terms of how people are shopping. So I think the next couple of months will be interesting. But it feels like we're moving from occasion into holiday, are the biggest changes.

Just a quick clarification question, if I may then. Where you talked about double-digit price increases across the market? Was that on a like-for-like basis? Or was that including the benefit of mix into formal?

And I think what we'll be able to look at it is, we'll be able to look at the categories, we'll be able to look at a bottom line by a brand and then we'll be able to look at category within a brand. So we'll be able to look at denim, we'll be able to look at jackets, we'll be able to look at dresses on that level. So we're seeing, I would say, the double-digit across brand and category is what we're seeing.

As there are no further questions on the phone, I will now pass over to [ Rosie ] for webcast questions.

Thank you, [ Marion ]. We've got our first question from Matthew McEachran from Singer. Please can you provide some insight into the penetration of BNPL? Is participating changing and providing any impacts on demand and geographical performance?

I think that's -- the answer to that is, we're not seeing any major changes at the moment on penetration of BNPL. It's a reasonably high proportion of our sales, but not huge. And we're not seeing changes. You see there are shift from one into another. And then what we did see in the earlier stage of BNPL that you saw are shift away from PayPal, but PayPal coming back into the space now. But overall, the penetration is not changed much in the last 2 years, I'd say.

Thank you. Thanks, everyone who submitted their questions. I would now like to hand back to the speakers for any additional or closing remarks.

Thank you, John here. So listen, just thanks, everybody, for dialing in this morning. The key message, I think, is we're sticking to our guidance in terms of looking at the balance of the year and balance to achieve. So hope to see you all very soon. And thanks for dialing in this morning. Thank you.