Boohoo’s profits fall as consumers reduce their spending

Boohoo, a fast-fashion retailer, has cut its sales and profit estimates for the year as consumers reduce their purchases.

The UK company announced on Tuesday that they expected revenue to drop between 12 and 17 percent in the year to the end February. Boohoo predicted a drop of up to 5 percent in May.

The group has struggled to cope with rising costs and falling demand since the boom of online shopping sparked by pandemics. Since its peak in 2020, the retailer’s value has dropped by more than 90%. Asos, a German online retailer and Zalando both experienced similar drops after the pandemic.

Boohoo warned that the weaker topline would affect its profits for this current financial year. It said that adjusted earnings before tax, depreciation, and amortization would range between £58mn to £70mn. This is down from the previous range between £69mn to £78mn.

John Lyttle, the chief executive of the company, said that “more than £125mn  in adjusted cost savings to support our investment program” had been identified. He also stated that “his confidence in the group’s medium-term prospects remains unchanged”.

Capital expenditures for this year have also been reduced to £75mn, from an initial range between £80mn-£90mn. Boohoo updated its forecasts after reporting a 17 percent decline in revenue from the six-month period ending August, which was £729.1mn.

Early trading saw shares of Boohoo fall by 10 percent.

Shore Capital analysts said that the new forecasts of the group were “influenced” by a slower volume recovery than expected and a focus on more lucrative sales.

Peel Hunt analysts said that they expect Boohoo’s margins to recover substantially in the next couple of years, but for this recovery to take place its sales will need to stabilize. “This remains the test until 2024.”

Boohoo experienced a shareholder revolt over executive compensation during the annual general meeting held in June. A third of shareholders voted against the annual remuneration reports.

At the beginning of September, British retail group Frasers – controlled by retail entrepreneur Mike Ashley – increased their holding to Boohoo.

Post Disclaimer

The following content has been published by Stockmark.IT. All information utilised in the creation of this communication has been gathered from publicly available sources that we consider reliable. Nevertheless, we cannot guarantee the accuracy or completeness of this communication.

This communication is intended solely for informational purposes and should not be construed as an offer, recommendation, solicitation, inducement, or invitation by or on behalf of the Company or any affiliates to engage in any investment activities. The opinions and views expressed by the authors are their own and do not necessarily reflect those of the Company, its affiliates, or any other third party.

The services and products mentioned in this communication may not be suitable for all recipients, by continuing to read this website and its content you agree to the terms of this disclaimer.