Boohoo Group Plc is forecasting a double-digit drop in sales and profits to come in at the lighter end of forecast as consumers reduce spending on fashion online.
he fast-fashion retailer, headed by Offaly-born John Lyttle, expects sales to fall about 12 percent this fiscal year. Boohoo said the economic backdrop is challenging and the focus is on reducing costs.
The drop in sales reflects the sharp change in fortunes for online clothing retailers, whose sales have soared during the pandemic, only to quickly reverse as people returned to stores.
Boohoo, owner of brands from PrettyLittleThing to Karen Millen, lowered its earnings forecast back in September and warned that consumer confidence is weak as shoppers become choosier and return more clothes.
The retailer said on Thursday the outlook for demand was uncertain but cost inflation was expected to ease in the second half of the year. The company sees a profit margin of 3.5 percent, near the low end of a previous guidance of 3% to 5%.
Boohoo shares fell 71 percent last year.
“Following a record Christmas trading season for many multi-channel retailers, Boohoo sales trends confirm the ongoing Covid online clearance and return to stores, helped by the Royal Mail strikes and overall delivery delays,” wrote Stifel analyst Caroline Gulliver in a note to customers.
Striving to control costs, Boohoo is carrying less inventory than a year ago to be as flexible as possible in the face of an uncertain consumer environment. The company is also sourcing more garments closer to home markets to manage freight costs and delays. Boohoo said Thursday it had seen progress in supply chains.
Rival Asos Plc said last week the final four months of the year have been volatile, with UK sales down 8 per cent and the company set to report a first-half loss on heavy discounting and write-downs.
Boohoo is still recovering from a 2020 labor scandal that led to changes in company leadership. In November, fresh allegations surfaced after an undercover investigation by The Times revealed workers picking and packing clothing orders at a Boohoo warehouse in Burnley were subjected to grueling working conditions. Boohoo said at the time it didn’t think the report accurately reflected the work environment.
Higher return rates have been a drag for the retailer as shoppers are demanding a better fit from dresses and skirts, rather than loungewear, which has been more commonly purchased during the pandemic. Boohoo started charging customers £1.99 for returns last year after Zara owner Inditex SA began charging online returns to lure customers back to its brick-and-mortar stores.
Boohoo’s fiscal year runs through February.
