LONDON (ShareCast) - (Sharecast News) - Fast-fashion retailer Boohoo warned on full-year profits on Thursday as it pointed to higher returns in the UK and a weaker-than-expected performance in the US.
For the year ending 28 February 2022, the company now expects net sales growth to be 12% to 14%, down from previous guidance of 20% to 25%. Adjusted EBITDA margin for the year is expected to be 6% to 7%, down from previous guidance of 9% to 9.5% and implying adjusted EBITDA of between £117m and £139m.

"This is due to significantly higher returns rates impacting net sales growth and costs, with continued extended delivery times impacting international demand, consequently driving lower returns on marketing expenditure, and significant ongoing pandemic-related inbound freight cost inflation," it said.

In an update for the three months to 30 November, Boohoo said group total net sales rose 10% from the same period a year ago to £506.2m. UK net sales were up 32% at £320.3m, while the US saw a 14% decline to £104.6m. In rest of Europe, net sales fell 12% to £53.9m, while rest of world net sales dropped 21% to £27.4m.

The retailer highlighted "exceptional" demand in the UK, but said the international performance was impacted by significantly longer customer delivery times as a result of the pandemic, with all of its international sales currently fulfilled from the UK distribution network.

As far as Europe is concerned, Boohoo said that having seen strong signs of a recovery in September, revenue has declined in the latter months of the period amid increased consumer uncertainty.

Meanwhile, its performance in the US "has not seen the recovery previously anticipated" due to the continued impact of reduced air freight capacity on delivery times to customers.

Chief executive John Lyttle said: "The strong performance in our core UK market, across both our established and acquired brands, demonstrates the potential to capture and grow market share in key markets. In international markets, our proposition continues to be significantly impacted by ongoing service disruption due to the pandemic, which, in addition to increased recent consumer uncertainty, has weighed on our performance."

At 0900 GMT, the shares were down 14.5% at 117.85p.

Laura Hoy, equity analyst at Hargreaves Lansdown, said: "Boohoo's in a difficult position - it's made its name selling cheap clothes at the click of a button. That means the group either has to swallow inflation costs at the expense of margins, or risk losing some of its price-sensitive customers. Plus, many are put-off by longer than usual shipping waits, which the group has very little control over at the moment.

"All of its orders are fulfilled by its UK logistics network, which has been overwhelmed by pandemic-related shipping delays. The group's working on a new distribution center in the US, but it won't be online for at least another year. By then the Americans could have moved on to one of the group's many competitors.

"Management believes the issues are transient and we're inclined to agree - but the question on everyone's mind these days is what exactly 'transient' means. The supply chain bottle necks and cost inflation aren't going to last forever, but another year coping with this kind of disruption would be disastrous for the retail sector, Boohoo included."

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