Boohoo cuts full-year outlook amid challenging consumer backdrop
By Michele Maatouk
Date: Wednesday 28 Sep 2022
(Sharecast News) - Fast-fashion retailer Boohoo cut its outlook for the full year on Wednesday and reported a slump in interim profit, as it pointed to a challenging consumer backdrop.
The company said it now expects lower sales than previously anticipated, which in turn means that adjusted EBITDA margins are likely to be between 3% and 5%, down from previous guidance of 4% to 7%. Boohoo, which had previously guided to "low single digits" growth in revenue, highlighted an increase in inflation-driven costs.
The downgrade came as it said that adjusted pre-tax profit for the six months to 31 August slid 90% to £6.2m, with revenues down 10% on the same period a year ago to £882.4m.
Boohoo noted that as previously guided, returns rates were up significantly year-on-year, and ahead of pre-pandemic levels.
Revenues in the UK - which accounts for 62% of group revenue - declined by 4%, softening through the second quarter as inflationary pressures increased and Boohoo said consumer demand appears to have been dented by the cost-of-living crisis. Meanwhile, international revenues fell 17%.
Chief executive John Lyttle said: "Performance in the first half was impacted by a more challenging economic backdrop weighing on consumer demand. Over the last three years the group has seen significant gains in market share achieved across our brand portfolio, particularly in the UK where our price, product and proposition resonate strongly with customers.
"We have a clear plan in place to improve future profitability and financial performance through self-help via the delivery of key projects, which will stand us in good stead as macro-economic headwinds ease. We remain confident in the long-term outlook, as we continue to offer customers unrivalled choice, inclusive ranges and great value pricing, giving them even more reasons to shop with us."
At 0850 BST, the shares were down 9.3% at 33.32p.
Victoria Scholar, head of investment at Interactive Investor, said: "The cost-of-living crisis and stiff competition for the fickle fashion consumer are taking their toll on the fast fashion online brand. Boohoo is struggling with weakening consumer demand as the UK economy heads towards a recession. It has also been grappling with increasing return rates perhaps as consumers now have less money to spend on discretionary items like fashion.
"Boohoo has been trying to lure customers through aggressive discounting, offering up to 75% off in their sales at the moment. However, by reducing prices to compete with the likes of PrettyLittleThing and Primark, margins are likely to suffer. Shares in Boohoo have had a torrid time lately, shedding more than 85% over the last year."
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