Boohoo Group has been hit by a £26 million increase in international shipping costs, volume-adjusted, over the rates it experienced two years ago due to the pandemic’s impact on airfreight capacity and pricing.
The increased shipping costs are predicted to continue until airfreight capacity is restored and pricing normalises, it says. The company has also been hit by increased return rates. It said in the UK return rates had increased on the prior year, driving up return rates overall even though international return rates are broadly the same as the previous year.
The opening of two new warehouses and a strengthening of the infrastructure will help Boohoo scale its multi-brand platform, the Group CEO John Lyttle said at the Boohoo Group’s interim results this week. However the warehouses are not yet operating at full capacity and are not therefore as efficient as the existing warehouse, impacting profitability in the short-term.
The additional distribution centres are in Wellingborough and Daventry. Lyttle said that the increased warehouse and distribution capability is now capable of supporting more than £4 billion in net sales.
Boohoo Ggroup is now operational in four warehouses: the long-established Burnley site, which serves boohoo, boohooMAN, MissPap and Debenhams; the Sheffield facility for PrettyLittleThing; Wellingborough, which now houses Nasty Gal, Karen Millen, Coast, Oasis and Warehouse; and Daventry, from which the new brands Dorothy Perkins, Burton and Wallis operate.
Disruption costs incurred during the transition, as well as the fact that the new facilities are not operating at full capacity, has added costs in the half year around £4.4 million higher than the run rate in the company’s other facilities, it said.
Boohoo Group has also committed to plans to open a new distribution centre in North America in 2023.
Boohoo Group said it was ‘well under way’ with its automation project at its Sheffield warehouse with significant capital expenditure of £50 million incurred. During the works needed to build the automation equipment whilst the facility remains operational, additional costs of working of £1.9 million have been incurred, which are included in exceptional costs. The company said the disruption will continue into the second half of the year before the efficiency savings rapidly re-claw the expense.
