Boohoo’s profits plunge following pain of cost-of-living pressures
Half year profits at Boohoo have plummeted by 90% and the group has warned of lower revenues going into 2023 as the cost-of-living pressures continue to hamper demand.
Shares in the group also dropped nearly 10% this morning to 32.8p as the Manchester-headquartered retailer revealed its financial results for the six months to 31 August 2022.
The online retail giant, which was a beneficiary of the pandemic-induced boom in e-commerce, reported a 10% decline in revenues from £975.9m to £882.4m.
Adjusted pre-tax profit plunged 90% to £6.2m. That’s down from £63.8m for the same period in 2021.
Adjusted EBITDA has also fallen from last year’s £85.1m to £35.5m, that’s a drop of 58%.
It reported a net debt of £10.4m compared to cash reserves of £98.4m last year and £207m for the same period in 2019.
Boohoo warned that as a result of the impact that the macro-economic and consumer backdrop has had on the group’s revenues in the first half, it is now expecting a similar rate of revenue declines ‘to persist over the remainder of the financial year if these conditions continue.’
It said increases in inflation-driven costs as well as lower sales than previously anticipated mean that adjusted EBITDA margins are likely to be between 3% and 5%, compared to the previously guided range of 4% and 7%.
John Lyttle, Group CEO, said the performance in the first half was impacted by ‘challenging economic backdrop weighing on consumer demand.’
He said: “Over the last three years the Group has seen significant gains in market share achieved across our brand portfolio, particularly in the UK where our price, product and proposition resonate strongly with customers.
“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 macro-economic headwinds ease.
“We remain confident in the long-term outlook, as we continue to offer customers unrivalled choice, inclusive ranges and great value pricing, giving them even more reasons to shop with us.”
Russell Pointon, Director of Consumer at investment research and consultancy firm Edison Group, said: “The difficult trading update reflects the ongoing challenges faced by almost all fashion retails. ASOS and Boohoo’s key demographic of 16-25 year olds have been heavily impacted by the cost-of-living crisis, with many choosing to cut spending on new clothes and opt for cheaper secondhand alternatives.
“Furthermore, there is also a growing sense that a significant amount of Boohoo’s customer base is slowly turning against fast fashion. The company’s announcement earlier this year that it was partnering with Kourtney Kardashian on a “sustainability journey” was met by many with sarcasm and disbelief across social media.”