Boohoo recovery plan doubts grow as losses hit £160m
Revenue was down 17% to £1.46 billion, which the business said came "as group performance continued to be impacted by a difficult macroeconomic environment".
Weak consumer demand has only added to the problems facing Boohoo.
The business has been pursuing higher margins, but the sales slowdown suggests that it’s struggling to do so without losing customers.
Yanmei Tang, analyst at Third Bridge, said: “Investors want Boohoo to make profit, but raising prices due to inflation while customers face financial strain puts them in a tough spot.”
Julie Palmer, Partner at Begbies Traynor, said: “Management can continue to cut costs and invest in automation across the group, but it also has to make sure it resonates with customers.
“In today’s competitive landscape for fashion, that’s not going to be easy, especially as cheaper competitors continue to take market share and there is a growing shift away from fast fashion amongst younger generations who increasingly prefer to buy pre-loved garments.”
The slide in sales came across all regions, including an 18% decline in the US, which Boohoo had hoped to be a key part of its turnaround strategy. Boohoo said long delivery times have “undoubtedly impacted demand” in the US, but the company hopes that this will improve as it opens a new warehouse in in Elizabethtown, Pennsylvania.
Guy Lawson-Johns, equity analyst at Hargreaves Lansdown, said: “International markets, especially the US, hold the key to the group's future growth, but extensive investment has so far yielded weak results. And with customer KPIs continuing to trend in the wrong direction, it doesn’t look like a miraculous recovery is around the corner.”
Restructuring costs weighed heavily on the business, as it cut 1,000 jobs during the year as part of its effort to drive up margins. Those costs helped plunge the firm into £95 million debt, having had £6 million in net cash a year earlier.
Analysts at Peel Hunt said they were “still confident in the direction of travel”, but cut their forecasts for future sales and profits.The City investment bank now sees sales next year rising by just 1.8%, compared to the previous 6.4% projection, with underlying profits of £67 million, down from its prior forecast of £88 million.
The shares lost as much as 6.3% to 33p this morning, leaving the business valued at a little over £400 million. That’s down more than 10% for the year to date, and more than 90% since peaking in 2020.
CEO John Lyttle said: “The group is now well positioned to return to growth, and we are focused on ensuring that growth is both sustainable and profitable.”
