Boohoo Group shares slumped to an eight-year low after the UK fast-fashion retailer cut its earnings and revenue forecasts as it lowered prices to attract cash-strapped shoppers.
The owner of the Karen Millen and PrettyLittleThing brands is the latest clothing retailer to warn that business conditions are worsening as sticky inflation hits consumer demand. Boohoo shares fell as much as 11 per cent.
The company has had a difficult few years, weathering a labour scandal and then being buffeted with inflation and a drop in spending online after the ecommerce boom during Covid lockdowns. It has also had to cope with higher freight and energy costs, though that’s starting to ease now.
Competition is also intense as shoppers return to bricks-and-mortar retailers. Upstart ecommerce rival Shein has been disrupting the industry with made-in-China clothing at cut-rate prices like $1 panties and $3.25 leather tank tops.
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Full-year sales will probably drop 12-17 per cent, Boohoo said on Tuesday. Adjusted earnings may drop as much as 8 per cent, according to the retailer, which has predicted expected an improvement.
Rival Asos is also struggling and last month said that a wet July and August had resulted in disappointing sales. H&M has said that abnormally warm weather in Europe dented sales in September.
Asos shares fell as much as 4.4 per cent on Tuesday, while German online fashion retailer Zalando dropped as much as 7 per cent.
Boohoo said it has been reducing prices to make its offerings more competitive in a UK clothing market where inflation has hit 8 per cent. Revenue in the UK, which accounts for nearly two-thirds of sales, fell 19 per cent, revealing the impact that inflation has had on demand.
The maker of Nasty Gal clothes said sales were weakest at smaller labels such as Oasis and Warehouse. The company did manage to push up its gross margin in the UK as some supply chain costs eased and return rates reduced slightly.
Boohoo has also been working to improve its US business which suffered as it took too long to send parcels to customers although it has since opened a distribution centre there which it said is helping next day and express delivery options. The warehouse in Pennsylvania is now able to ship products to 95 per cent of the US within three days. – Bloomberg
