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Shares in Boohoo tumble as pandemic hits profits

By Abigail Townsend

Date: Wednesday 04 May 2022

Shares in Boohoo tumble as pandemic hits profits

(Sharecast News) - Fast fashion retailer Boohoo Group reported a sharp decline in annual profits on Wednesday and warned of a difficult year ahead, causing the shares to tumble.
Revenues rose 14% in the year to 28 February, to £1.98bn. But adjusted earnings before interest, tax, depreciation and amortisation fell 28% to £125.1m, while pre-tax profits tumbled 94% to £7.8m.

The online retailer said that despite seeing strong growth in the UK, its largest market, it had been hit by higher-than-expected return rates in the second half, subdued consumer demand during lockdowns and supply chain challenges, including extended delivery times and higher inbound freight costs.

Boohoo added that it expected these pandemic-related external factors to continue into the current year.

Revenue is forecast to be broadly flat in the first half, as higher return rates lead to net sales being down year-on-year in the current quarter, while revenue percentage growth is estimated to be in the low-single digits for the full year. Adjusted EBITDA margins are forecast to come in between 4% and 7%.

As at 1000 GMT, shares in the Aim-listed group were down 14% at 69.16p.

John Lyttle, chief executive, said: "In the year ahead, we are focused on optimising our operations through increasing flexibility within our supply chain, landing key efficiency projects and progressing strategic initiatives such as wholesale and our US distribution centre.

"This will ensure that the group is well-positioned to rebound strongly as pandemic-related headwinds ease."

Matt Britzman, equity analyst at Hargreaves Lansdown, said: "There's no doubt there's demand for Boohoo's products, but persistent shipping challenges mean serving that demand is becoming increasing difficult, especially in overseas growth areas.

"Plans are afoot to build a distribution centre in the US, but it's costly and won't provide an immediate solution. Fast fashion comes with customers willing to flit between brands. If they can't get the latest trends quickly, US customers might move on permanently, adding a layer of risk to this project."

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