Britain’s Boohoo warns on profit as Christmas partywear loses its sparkle
British online fashion retailer Boohoo (BOOH.L) on Thursday warned on annual profit for the second time in four months, blaming a spike in product return rates, disruption to international deliveries and higher inbound freight costs.
It said the new Omicron coronavirus variant could pose further demand uncertainty and elevated returns rates, particularly in January and February if purchased partywear is left unworn by cancelled social gatherings.
Shares in the Manchester, northern England, based group, which sells clothing, shoes, accessories and beauty products aimed at 16 to 40-year olds, were down 16.3% at 1012 GMT, extending 2021 losses to 66.4%.
Shares in rival ASOS (ASOS.L), which warned on profit in October, were down 4.4%.
Boohoo’s latest warning adds to concerns over Christmas trading after electricals retailer Currys (CURY.L) said on Wednesday its market had softened.
Boohoo has been seeking to improve its image following negative publicity over supply chain failings but had warned on the outlook in September.
It said it expected net sales growth in the year to Feb. 28 2022 to be 12% to 14%, compared to previous guidance of 20% to 25%.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margin for the year was expected to be 6% to 7%, compared to previous guidance of 9% to 9.5%, implying adjusted EBITDA of 117-139 million pounds ($155.2-$184.4 million).
That compares to analysts’ average forecast prior to the update of 190 million pounds and 173.6 million pounds made in 2020-21.
“This is due to significantly higher returns rates impacting net sales growth and costs, with continued extended delivery times impacting international demand, consequently driving lower returns on marketing expenditure, and significant ongoing pandemic-related inbound freight cost inflation,” it said.
DRESSES GOING BACK
Boohoo said UK return rates in its third quarter to Nov. 30 were 12.5 percentage points higher than the same period last year and 7 percentage points higher than pre-pandemic levels driven by an exceptionally high dress mix. Boohoo shoppers typically have 28 days for UK returns.
Group net sales were up 10% to 506.2 million pounds in the quarter. But while net sales were up 32% in the United Kingdom, they fell 12% in the Rest of Europe division, were down 14% in the United States and plunged 21% in the Rest of World division.
The poor overseas performance reflected significantly longer customer delivery times. It said the United States had not seen the recovery previously anticipated due to the continued impact of reduced air freight capacity.
Boohoo fulfills all international sales from its UK distribution network. Its first U.S. distribution centre is not set to go live until 2023, although the company is considering options to expedite this process.
“The current headwinds are short term and we expect them to soften when pandemic related disruption begins to ease,” said CEO John Lyttle.
Boohoo also flagged higher exceptional items for the year of around 33 million pounds, primarily due to warehouse and new brand restructuring.