Boohoo Group reported a £91million annual loss, as it struggled with supply chain disruptions, weakened consumer demand and inflationary forces.
The Manchester-based fashion company, which owns PrettyLittleThing and Debenhams as well as Karen Millen, suffered a loss in the year to 28 February, compared to a profit before tax of 7.8 million pounds the previous year.
John Lyttle, the chief executive of the company, stated that profits were affected by a drop in sales, increased freight and logistics costs, and higher energy and labour costs. He also said that strategic investments made across all platforms continued to impact profit. He also said that there were significant one-off costs and inefficiencies with acquired brands. However, the latter have been addressed.
Sales dropped by 11% to just over £1.8 billion, but revenue was still 43 percent higher than the previous reporting year, 2020. UK sales are down 9 percent compared to last year but 61% higher than the regional total for 2020.
The gross margin dropped by 190 basis point to 50,6% due to the pressures of Covid on raw materials, freight and stock clearance.
Lyttle’s presentation of Boohoo’s “back to growth strategy” saw shares rise by 2 1/2p or 6.8 percent, closing at 41p.
Lyttle informed investors that the group has “made substantial progress” with operational priorities.
The retailer stated that its work on a phasing launch of an US distribution service has led to a “step-change in customer proposition”. It also said it had “a leaner, lighter and faster inventory proposition”, with stock down by 36 per cent on average.
It spent PS91 million on “building infrastructure for growth in the future”, including an automation centre in Sheffield that “had driven significant efficiencies and capacities”.
Lyttle added that the company also invested in lead times and prices: “This will ensure the group is well-positioned as headwinds ease, and we return to growth.”
He added that “macro conditions have improved and we are confident for the coming year.” “Inflationary costs pressures continue, but the outlook for the second half of this year looks more positive.”
The current financial year that ends February 28, 2024 is expected to have revenues between flat and down by 5 percent compared to the previous year. A greater emphasis will be placed on driving profitable sales.
The first half of the year is expected to see a decline in revenue between 10 and 15 percent. The group is expecting to see revenue growth in the second half of this year as a result of investments made on price, product, and proposition.
Boohoo stated that underlying earnings (before interest, taxes and depreciation) should increase year-on year for the 2024 fiscal year. According to market expectations, it has estimated that ebitda will be between 4 and 4.5 percent, with adjusted ebitda between £69 and £78 millions.
Mahmud Kamani said, “We have had days and days with higher costs. . . It’s a bit like dodgem cars, where you just move and swerve. Now. . . It’s not just exciting, but also fun because we have so many opportunities to explore.”
The pandemic was a boon to online fast fashion businesses, whose sales and profits boomed as their high-street rivals were temporarily closed. Asos, Boohoo and Asos were the online fast-fashion competitors that bought Topshop and Debenhams brands respectively.
The dramatic growth enjoyed by online fashion players in the two previous years has now slowed down.
The return of shoppers has given new hope to the battered high streets. Supply chain issues, a weakening in consumer demand, and higher returns rates – as consumers realise that they can’t afford to buy five dresses – have also hurt these businesses.
The meteoric rise in popularity of Shein – the Chinese online retailer that offers ultra-competitive pricing for the latest fashion trends – suggests online shopping is not over.
Since its founding by Chris Xu, an entrepreneur in 2008, the retailer has risen to the top of the industry. The retailer was rated as the world’s largest fashion retailer last year. Its $100 billion valuation made it more valuable than high street brands H&M and Zara.
According to a retail expert, Boohoo must improve its marketing to win back US customers from Shein, China’s newly dominant online retailer
Shein was built using the fast fashion model that its competitors pioneered: rapid production of large volumes of trendy clothing at low prices. Shein’s use of real-time technologies and a well-trained supply chain has allowed them to achieve this cheaper and faster.
It is gaining a larger share of the fast fashion market in the United States. This rapid growth could disrupt global players like Spain’s Inditex or Sweden’s H&M Group.
is also feeling the heat, as it eats away at their market share with cheaper and faster fashion.
Shein says pop-up stores are a part of their business model, and they help them to reach out to customers. This year, Shein plans to open 30 pop-up shops in Europe and the Middle East.