Shares slump after Boohoo profit alert

ONLINE fashion retailer Boohoo has downgraded its full-year sales and earnings expectations after challenging autumn trading.

At one stage shares plunged more than 40% to 22.4p on the profit alert, later recovering somewhat to close at 25p, down 34%.

In an update the Manchester company, which floated on AIM last year, said that while it had ramped up its marketing spend in October sales growth had not risen in line with expectations due to competition from high street retailers.

It said: “We believe this was principally due to heavy promotional activity on the UK high street arising from the warm autumn season.”

Despite this sales were still up 25% to in the four months to £50.7m, and on 10 month basis are up 28% to £117.9m.

The firm added: “In light of the prevailing sales momentum in the business, we expect the full year results to be below current market expectations. We now anticipate growth for the second half as a whole to be in line with the 25% growth for the four month period to 31 December 2014.   As a result we also expect the EBITDA margin for the full year to be in line with the first half at approximately 10%.”

Before this announcement, City forecasts had expected the business to make a full-year profit of around £17.3m.

On a more positive note, Boohoo said it had its best ever week in November as a result of the the Black Friday sales frenzy. At its peak sales demand was 2.4 times the previous busiest day.

Joint chief executives Mahmud Kamani and Carol Kane said: “Whilst the period proved a challenging trading environment, we have still grown the business by 25%, albeit short of our previous expectations.

“We are very confident that our fashion credentials, pure play online model and the significant investment in infrastructure will continue to drive growth in the UK and internationally.”

Boohoo floated at 50p last March and shares initially soared to more than 80p.

Commenting on the profits warning David Reynolds, an analyst at stockbrokers Jefferies, said: “A retail backdrop that was impacted by unseasonal weather in the third quarter crystallised a heavily promotional backdrop, negating some of Boohoo’s competitive advantage and perhaps exposing the early stage nature of the brand.”