Boohoo Group swings to first half loss, with worse to come, as consumer confidence dwindles

Fashion retailer Boohoo Group saw a loss for the first half of the year, swinging to a £15.2m pre-tax loss from a £24.6m profit a year earlier. The retailer has also warned that sales are likely to fall further over the rest of the year with adjusted EBITDA margins likely to be between 3 and 5%.

Revenue fell 10% year-on-year to £882.4m from £975.9m. This was, however, up 56% on pre-virus levels. 

In the UK market, revenue declined by 4.4% to £544.6m from £569.6m, due to “softening through the second quarter as inflationary pressures increased and consumer demand appears to have been impacted by cost of living pressures”, the company noted in a statement. 

John Lyttle, Boohoo CEO, comments: “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.

“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 macroeconomic headwinds ease. We remain confident in the long-term outlook.”

Analysts’ views

Commenting on boohoo’s trading update, Josh Holmes, Senior Consultant at Retail Economics says: “These results confirm that all is not well at the retailer. There’s no doubt about it, they are navigating through particularly challenging times with the business model under pressure.

“Following a pandemic-fuelled boom, many shopper habits have snapped back into place more forcefully than had been expected. Rising returns and weaker demand have collided with spiralling input and operating costs, which has hit profitability hard.

“The cost-of-living crisis is also hitting Gen Z consumers disproportionately given their typically lower wages and squeezed disposable incomes. It has encouraged many people back into stores as they avoid costly delivery and returns and can ill-afford to wait for refunds with spare cash under so much pressure.

“The international operation has also been hampered by ongoing disruption in supply chains which looks set to continue well into next year. There are some signs of improvement, but with such significant headwinds in the UK from inflation, rising interest rates and recession, it feels like things may get worse before there are signs of improvement.”

Looking at the wider fashion and apparel market, Rosalind Hunter, Partner at global consultancy Simon-Kucher & Partners, adds: “Retailers and fast fashion brands, like boohoo, in particular have been acutely aware of the impact the cost-of-living crisis has had – and will continue to have – on consumer spending habits.

“Having enjoyed significant sales growth during the pandemic as consumers turned to online retail therapy to cope with lockdowns, boohoo has seen a fall in revenue in their latest results released today. Net revenue in the UK, their main market, fell 4% versus 2% in wider Europe. The largest drop actually came from the US with a fall of 29%, although delivery issues are also impacting performance in this market.

“The details within the report show average the price has increased by 26% with orders falling 10% and conversion falling as well. Compared to 2019, the growth in the business is still clear with active customers up 47% and orders up 36%, although conversion is now lower than 2019 levels which would indicate consumers are definitely being more cautious also reacting to increases in average basket value.”

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