Boohoo shares are plummeting as fast fashion stars warn of continued sales declines
- Boohoo now forecasts adjusted underlying earnings of £58 million to £70 million this year
- The Manchester-based company’s first-half turnover fell 17% to £729.1 million
- Karen Millen, PrettyLittleThing and Dorothy Perkins are among Boohoo’s brands
Downgrade: Karen Millen owner Boohoo has cut its annual profit forecasts (Photo: Elle Macpherson)
Boohoo has cut its annual revenue and profit forecasts after a weak recovery in sales volumes.
The online fashion retailer now forecasts adjusted underlying profit to fall to £58m to £70m for the year ending February 2024, after initially forecasting £69m to £78m.
It also expects sales to decline 12 to 17 percent over the same period, compared to previous expectations of flat to minus 5 percent.
Sales fell 17 percent to £729.1 million in the six months to June, with demand in all areas hit by a preference for physical shopping among consumers.
But the Manchester-based company, which owns Karen Millen, PrettyLittleThing and Dorothy Perkins, attributed around half of the reduction to the decision to focus on more profitable sales within its labels.
In Britain, Boohoo’s biggest market, sales fell by more than £100m to £441.3m, which the company attributed to ‘price investments’, a weaker economic backdrop and a higher share of sales in its Debenhams marketplace.
At the same time, US demand was hurt by longer delivery times, while performance in Europe and the rest of the world was impacted by annual figures versus robust comparative wholesale figures with partners that came on board last year.
Although gross margins improved, the company still saw operating losses rise 80 percent to £21.2 million, partly due to the costs associated with the launch of the Pennsylvania warehouse.
John Lyttle, CEO of Boohoo, said: “During the first half we made significant progress on key projects and initiatives, including the launch of our US distribution centre.
“We have seen significant improvements in procurement lead times and invested in pricing to strengthen our value credentials.”
Boohoo Group shares fell 10 percent to 28.4p on Tuesday morning and has fallen more than 90 percent since summer 2020.
Like many other online fast fashion retailers, Boohoo benefited from the temporary closure of clothing stores at the height of the Covid-19 pandemic, but saw trading decline as lockdown measures were eased.
The country has also been badly damaged by supply chain problems, inflationary pressures and higher customer return rates, although the latter has improved somewhat this year.
Mike Ashley’s Frasers Group, known for its investments in struggling businesses, recently built a 9.1 percent stake in the brand, citing its “laser focus on young female consumers.”
Russ Mould, investment director at AJ Bell, said Boohoo “must hope that its core demographic has not lost interest, for financial and environmental reasons, in the kind of cheap, disposable fashion that is Boohoo’s calling card.”
He added: ‘Or, if so, that Boohoo can adjust its offering accordingly.’
Aarin Chiekrie, an equities analyst at Hargreaves Lansdown, said there is “a glimmer of hope that business can pick up again” for Boohoo, pointing to recent investments in expanding capacity, especially in the US.
He added: ‘If Boohoo can deliver on its proposition here, we could see volumes recover somewhat and fortunes turn positive again. That’s still a big ask, but the group has some liquidity that provides some breathing space to weather the storm.”