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UK's Boohoo warns of slower growth as supply issues weigh

Stock Markets May 04, 2022 05:55AM ET
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© Reuters. FILE PHOTO: A woman poses with a smartphone showing the Boohoo app in front of the Boohoo logo on display in this illustration taken September 30, 2020. REUTERS/Dado Ruvic

By James Davey

LONDON (Reuters) -British online fashion retailer Boohoo warned sales growth would slow this year, hit by a squeeze on consumer spending, higher product return rates and continuing supply chain and delivery problems, sending its battered shares even lower on Wednesday.

Shares in the group, which sells clothing, shoes, accessories and beauty products aimed at 16 to 40-year olds, were down 15% at 0900 GMT, extending losses over the last year to 79%, after it forecast "low-single digits" percentage growth in revenues for 2022-23 and an adjusted core profit (EBITDA) margin of 4-7% - both below analysts' consensus expectations.

For its year to Feb. 28, 2022, Boohoo made adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of 125 million pounds ($156 million) - down 28% but in line with guidance. Revenue increased 14% to 1.98 billion pounds, with an adjusted EBITDA margin of 6.3%.

Boohoo, an early pandemic winner, had warned on annual profit in December, blaming a spike in product return rates, disruption to international deliveries and higher inbound freight costs.

The group forecast broadly flat revenues in the first half of 2022-23, estimating a 4-6% rise in product returns above pre-pandemic levels would lead to a drop in first quarter net sales, with a return to growth in the second quarter. Performance is expected to improve in the second half of the year.

Boohoo said it would focus on retaining market share gains made over the last two years.

"We have to recognise the supply chain and particularly on outbound to our international markets is still going to be difficult for the rest of the year," said CEO John Lyttle, noting that shipping a parcel to the United States is taking ten days versus three to five days pre-pandemic.

He said the firm would aim to source more products closer to home, including from Europe and northern Africa, to reduce supply lead times and exposure to elevated freight costs.

It will also operate with lower levels of inventory and has started a cost savings programme, with a focus on efficiencies before raising prices for consumers.

"We'll be watching our competitors very closely. If we see some opportunity (to raise prices), will we take it? Yes, we will look at that," said Lyttle.

ASOS (LON:ASOS) and Next are among fashion retailers to have raised prices.

($1 = 0.8012 pounds)

UK's Boohoo warns of slower growth as supply issues weigh

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