Missguided.co.uk: Online Retail Stars Of 2013, Part 4

Never heard of fashion website Boohoo.com? You have almost certainly never heard of Missguided then, its younger sister who goes to all the same parties but keeps an even lower profile on the business scene.

Fashion etailer Missguided.co.uk, we suggest here, is about the same size and growing at the same phenomenal rate as Boohoo. At present we think both are roughly doubling in size every year.

Missguided has set itself a target to increase sales to £1 billion in five years. An IPO, as with Boohoo.com, cannot be far away.

Missguided.co.uk: Wants £1 Billion Sales

But let's first recap on our series to date. A growing number of online retailers are shuffling into the queue for a possible London Stock Exchange listing or refinancing of their businesses as the British obsession with internet shopping reaches fever pitch.

Of those we plan to analyse, we see a number that are very strong candidates for finding new investors - and then others which, from the outside at least, we struggle with.

Short of stockbrokers or advisers to cook the figures for us we decided to do some number crunching ourselves. Last month we studied the virtues of fashion upstart Boohoo.com, The Hut and appliances giant AO.com.

We took last week off to give our brains a rest but we're back with the second analysis of our online fashion etailers, the fourth in our series overall.

Now, we all understand that private companies are sometimes happier staying that way. However, sensible numbers for Missguided are probably the hardest to come by of all the companies we’ve looked at so far.



So, in order to get a handle on the way things are going, we refer to two touch points. The first is an article from earlier this year, quoting managing director Nitin Passi and suggesting that the company expected to make sales of between £50 million and £55 million in the year to March 2013.

However, we have also picked up figures from within the industry that by the end of summer the site was turning over £5 million a month. We therefore expect that with a festive lift and a strong sales trajectory from there that the firm will be making between £80 million and £100 million in this current financial year (roughly the same as Boohoo.com).

That would put Missguided as the second or third largest pure-play fashion etailer (depending on where it sits versus Boohoo.com in the final analysis and excluding all those former agency catalogue businesses such as N Brown and Shop Direct).

So where are all these shoppers coming from? We think the rise of Boohoo.com, Missguided and others such as FashionUnion.com (compare and contrast with Missguided and we challenge you to see the difference) and DaisyStreet.co.uk ('Women's Celebrity Led Fashion', goes the strapline which we will visit in the weeks to come) reflects the rise of the young, smartphone-equipped shopper who was born into the age of the internet.

Those consumers used to have a multitude of options on the high street. A decade ago there were literally dozens of small to medium fashion chains of which Bay Trading, Pilot, Select, Internacionale and Quiz are just a few examples. But that has been severely reduced partly because of the recession, because many of them failed by expanding too quickly to gain scale, but also partly because of the intense competition from price-focused fashion behemoths such as Primark and H&M.

These girls probably regard Topshop and Zara as a bit too expensive and H&M and Primark as not cutting edge enough.

The rise of these young, online fashion retailers in recent years spurred by suppliers that used to supply the likes of Bay Trading and Select has been so fast we actually think some of the chain have not really clocked them as a problem yet. But, just as the old middle market didn't initially see the rise of the discounters as a threat, now those same discounters will increasingly be at the mercy of these still small, nimble fashion websites.

No wonder New Look has been pumping resources into getting its online offer up to date this year. But also confusing that Primark has so far eschewed the internet beyond its dalliance with Asos. Will this prove to be a serious misjudgement? (we resisted the temptation to throw in a Missguided pun then.....).

But, similar to the young fashion chains of last decade, many of these sites are regionally-based (most notably in Manchester in the case of Boohoo.com, Missguided.co.uk, DaisyStreet.co.uk and Fashionunion.com) with strong links to family, rag-trade suppliers - if, indeed, they are not actually owned by them outright.

They are producing hundreds of new items between them every week, updating their sites on a daily basis and delivering the next day if you can get your order in by 9:30 pm.

We think that Missguided provides a bit more information on its product pages than Boohoo about individual products which we believe is becoming more and more important. It also has a list of recommended products to consider on the right hand side of the product page.

The fact that Boohoo.com and Missguided.com both serve a very similar customer speaks volumes about the opportunity in the market. A 15 to 20 year-old girl who most likely does not live in central London. They feed off global fashion trends and celebrity gossip on the one hand and what the rest of the girls in the town are wearing on the other - both sides of this equation are equally important.

And the style is very different to what you would ever see walking the streets of the West End. If you really want to know where the volume fashion trade in this country is heading, you need to be in Manchester, Birmingham's Broad Street on a Saturday night or even smaller regional towns like Wigan or Halifax.

These firms are effectively by-passing the capital, we think - but that is a story for another time.
The point is that these operations are offering customers a route to a night out with a whole new outfit for less than £60. Something you would not be able to achieve very easily at Topshop.

Missguided’s ownership structure is also interesting. It follows similar lines to Boohoo with a strong Manchester family influence. The firm is run by managing director Nitin Passi and is linked to former supplier By Design Plc (which we think has now been subsumed into Missguided). Oddly a Japanese tech investment firm Nakai has some involvement (we assume this is the source of the tech know-how, perhaps?). But and then the firm is ultimately held in a trust in the name of R Passi - we assume to be director and family head Rajesh.

Similar to Boohoo, Missguided also has its eye on international markets. It has already launched a US site, MissguidedUS.com and is shipping from $10, one for Australia at MissguidedAU and one for continental Europe at Missguided.eu.

Overseas sales are already an estimated third of all turnover and the company aims to hit £1 billion sales by 2018.

With better profitability than a firm like Asos which is heavily reliant on other people's stock we think firms like Missguided are now ripe for new investment.

Our verdict: we think they will not be far behind Boohoo to the market and neither will their projected valuation. We suspect the exact amount will be a source of competition between these two Mancunian rivals....

We'll continue the series early next year when we'll be taking a break from fashion to look at fast-growing general merchandise retailer Worldstores.