Written by James Davey
LONDON (Reuters) – British fashion retailer Boohoo on Wednesday warned against full-year sales and profits, blaming a deteriorating macroeconomic and consumer background as it reported a 58% drop in its first-half core profit.
Shares in the group fell 10% at 0838 GMT, extending 2022 losses to 73%, after it said it now expects revenue to fall by about 10% from the full year 2022-23, with a basic profit margin between 3% and 5%. .
It previously expected revenue growth in “low single digits” and an EBITDA margin of 4% to 7%.
Rivals ASOS (LON 🙂 and Primark also warned of earnings this month.
Boohoo, which sells apparel, footwear and accessories to those ages 16 to 40, said the lower margin forecast reflected inflation-driven cost increases as well as operational delays resulting from lower-than-expected sales.
Revenue in the first half to August 31 fell 10% to 882.4 million pounds ($944.6 million) due to weaker-than-expected consumer demand, a significant increase in product returns and higher delivery times for products sold in overseas markets.
Basic profits decreased to 35.5 million pounds from 85.1 million pounds in the previous year.
“We were expecting a return to growth in the second quarter, but what we’ve seen is that the overall environment is not good,” said Neil Kato, Reuters chief financial officer.
“We’ve seen a slowdown in the UK market and we haven’t seen the international (markets) pick up yet.”
CEO John Little has highlighted high interest rates in the UK, which accounts for 60% of its business, as an area of particular customer concern.
“We are talking about doubling and possibly tripling interest rates so it will definitely have an impact,” he said.
Cato said Boho had limited exposure to the recent fall in the value of the pound.
Boohoo said it’s focusing on ability control factors. It added that it was importing more offshore markets, had lower stock levels and was now charging customers for revenue in Britain.
The company added that investment in infrastructure will also boost efficiency. Automation went live at its distribution center in Sheffield this month, while a US warehouse will open in 2023-24.
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