Boohoo forecasts revenue decline as consumers spend less
BOOHOO Group forecast a double-digit decline in its revenue, and that earnings will come in at the lighter end of its guidance, as consumers cut back online spending on fashion.
The British retailer expects sales to drop about 12 per cent this financial year. Boohoo said that the economic backdrop is challenging, and that it is focused on reducing costs.
The fall in revenue reflects the sharp change in fortunes for online clothing retailers, whose sales soared during the pandemic, only to quickly reverse as people returned to stores.
Boohoo, owner of brands from PrettyLittleThing to Karen Millen, had already cut its profit guidance in September, warning that consumer confidence was weak as customers got pickier and returned more clothing.
The retailer said on Thursday (Jan 19) that the outlook for demand is uncertain, but cost inflation is expected to ease in the second half of the year. The company expects an earnings margin of 3.5 per cent, near the low end of a previous forecast of between 3 per cent and 5 per cent.
Boohoo shares fell 71 per cent last year.
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“After a bumper Christmas trading period for many multi-channel retailers, Boohoo’s sales trends confirm the continued Covid online unwind and shift back to stores, aided by the Royal Mail strikes and general delivery delays,” Stifel analyst Caroline Gulliver wrote.
Boohoo is seeking to control costs and is carrying less stock than a year ago, to be as flexible as possible against an uncertain consumer backdrop. The company is also sourcing more garments closer to home markets, to help tackle freight costs and delays. Boohoo said on Thursday that it has seen progress in its supply chains.
Rival fashion retailer Asos said last week that the final four months of the year were volatile, with UK sales falling 8 per cent, and the company set to report a loss in the first half due to heavy discounting and stock write-offs.
Boohoo is still recovering from a labour scandal in 2020, which sparked governance changes. Fresh allegations arose in November, after an undercover investigation by The Times said that staff picking and packing clothing orders in a Boohoo warehouse in Burnley faced gruelling working conditions. The retailer said at the time that it did not believe the report accurately reflected its working environment.
Higher return rates have been a burden for the retailer, as shoppers demand a better fit from dresses and skirts rather than loungewear, which was bought more during the pandemic. Boohoo started charging customers £1.99 (S$3.25) for returns last year, following Zara owner Inditex’s imposition of fees for online returns to tempt customers back into its brick-and-mortar stores.
Boohoo’s financial year runs till February. BLOOMBERG
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