Boohoo’s float will value the business at £560m – is the business worth it or this more evidence of a dotcom bubble that is set to pop?

Fast-growing etailer Boohoo is set to raise £300m from next week’s IPO which values the business at £560m. Added together with electricals specialist Ao.com’s initial £1.2bn valuation – the business is now valued £1.5bn – it has led some City-watchers predicting a dotcom bubble reminiscent of that of 1998 to 2000.

Of course, that bubble burst, with one of the most memorable examples a company with a scarily similar name and business to Boohoo – Boo.com – which made investors cry after it spent $135m of venture capital in just 18 months before going bust.

However, that does not mean that Boohoo will share the same fate. Lets not forget that Asos – to which Boohoo will inevitably be compared – turns 14 this year and continues to be the darling of the City.

Boohoo’s founders – the affable yet straight-talking Mahmud Kamani and business partner Carol Kane – give a compelling argument as to why Boohoo will follow in Asos’ footsteps rather than it’s defunct dotcom namesake Boo.

Boohoo is growing rapidly – sales soared 70% to £91.9m and adjusted EBITDA rocketed 188% to £10.1m. Like Asos it also has a big overseas opportunity that it is keen to grasp with both hands.

In fact, that’s the reason it’s floating, according to Kamani. “If we invest in the business it’s easier to roll it out globally,” he says.  “We need infrastructure, we need IT and distribution. We can see what a seriously big business it’s becoming and we want it to be bigger and bigger.”

Already 37% of its sales come from overseas despite only recently launching its first international site in France.

“We have people from 100 different countries buying from us. They’re coming to us at the moment, we want to take that to them,” says Kamani.

Overseas accounts for nearly 70% of rival Asos’ sales and Boohoo’s ambitious expansion plan – it is plotting sites in the Benelux countries, Scandanavia, Spain, Germany, Italy and even Russia and China – is aimed at emulating its success.

However, there is one area that Boohoo trumps even the mighty Asos – margins.

Boohoo sells only own brand product and is run very efficiently. Kamani and Kane know sourcing well, with many years of experience of supplying high street retailers including Primark, Topshop and New Look, and the business now achieves a margin of over 60%.

“We’re healthy in our margins because we’re in control of our brand right from design through production,” explains Kane.

This also enables it to compete with the very best in term of fast fashion. Young shoppers are more concerned about wearing the latest trends than ever before and Kane explains that Boohoo can bring clothes from the catwalk to the closet within six weeks.

The business targets a slightly younger audience to Asos, of 16 to 24 year olds – an audience for which online is becoming the first port of call for shopping. And with the major high street rival at its price points Primark shunning the web for the forseeable future, it gives Boohoo a chance to gain real competitive advantage.

It also has an ambitious growth plan. It is investing in its distribution centre so it has the capacity for £1bn of sales and as well as its overseas growth, it is looking to broaden its offer to boost revenue.

“We think of lots of types of girls in that  [16 to 24 year old] demographic. Going through school, to going through uni, to getting her first job. We’ve introduced plus just last week,” says Kane.

Boohoo also launched menswear last year - just 9% of sales right now, but a part of the business the management team are keen to boost – and ‘Boutique’, a slightly more premium collection.

Kane says a petite, tall and even maternity range are destined to follow.

While a £560m valuation may seem a big step for a company that makes just £10m, investors are betting on its future.

And this is not 2000 – we know the internet is not a fad. It’s all-encompassing and where generation Z are spending all their time, including shopping. It is going to grow exponentially – and the likes of Boohoo are going to benefit.