Tears at Boohoo as cost of living crisis brings growth to a halt

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Profit margins are being squeezed by rising costs and the online retailer said growth would be flat in the next six months

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ast fashion juggernaut Boohoo today warned sales growth will grind to a halt this year as the cost of living crisis hits shoppers.

The warning came as industry data pointed to the fastest rise in shop prices on record. Boohoo said it hoped to avoid raising its prices but could be forced to by rising costs.

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Manchester-based Boohoo painted a bleak picture of the year ahead. “Uncertain consumer demand”, higher levels of returns and continued shipping delays mean revenue will be flat in the first half of this year. Growth for the full year will be, at best, half what it was last year.

That guidance was below City forecasts, sending the stock crashing 8.2p, or 10.3%, to 71.74p.

Boohoo, which also owns brands like Karen Millen, Warehouse and Debenhams, is looking for “efficiencies” in its business and pledged to buy more clothing from factories closer to home to beat supply chain problems. It will hold less stock to keep costs down.

CEO John Lyttle said: “In the year ahead we are focused on optimizing 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.”

Figures published by the British Retail Consortium today showed shop price inflation running at its fastest rate since 2011 and fastest ever for some items like furniture, electronics, and books. BRC chief executive Helen Dickinson said retailers were being forced to raise prices by soaring energy bills and supply chain disruption, prompted by war in Ukraine and new lockdowns in China.

“Retailers will continue to do all they can to keep prices down and deliver value for their customers by limiting price rises and expanding their value ranges, but this will put pressure on them to find cost-savings elsewhere,” she said. “Unfortunately, customers should brace themselves for further price rises and a bumpy road ahead.”

Barclays said Boohoo faced “the most severe headwinds” in the fast fashion sector.

It has grown rapidly in recent years through a string of acquisitions and invested heavily in building new warehouses and expansion in the US. That spending spree ran down cash reserves from £276 million to £1.3 million at the end of February.

Matt Britzman, an equity analyst at Hargreaves Lansdown, said: “The outlook now looks murky at best. Cost and shipping challenges remain very much intact and there’s another tough year on the horizon with revenue and profit growth expected to be hard to come by.”

Boohoo today reported a 14% rise in revenues to £1.9 billion in the 12 months to February 28 but pre-tax profits crashed 94% to just £7.8 million. Both figures were in line with recent guidance.

Shares in the company have fallen by more than 75% in the last year.


Credit: www.standard.co.uk /

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