Boohoo has warned it will focus on “cost efficiencies” going forward as part of an effort to manage a global sales slowdown due to rising inflation.
The online fashion retailer lowered its full-year outlook while releasing results for the first half of its fiscal year ended August 31, and said it now expects sales to fall over the 12-month trading period.
It previously forecast low single-digit revenue growth for 2022-23.
Boohoo said it expects sales to decline at a similar rate to the first half.
cost of living at the latest
Sales in its core UK market fell 4% for the six months from the same period last year and weakened in the second quarter as pressures squeezed consumer budgets Cost of Living Crisisthe company announced.
International sales fell 17%.
Revenue fell 10% to £882.4 million.
The company said this reflects not only weaker-than-expected consumer demand, but also a significant increase in product returns and longer delivery times for goods sold in overseas markets.
As a result, the company reported a 58% fall in core profits for the first half to £35.5 million, adding that its full-year margin under the earnings metric would fall to between 3% and 5%, compared to a previously forecast 4%7 %.
The company said it wants to save costs by refocusing on operational efficiencies.
These include increased efforts to source goods from European rather than Asian shores, warehouse automation and overall cost cutting.
However, it is understood there are no plans for job cuts among Boohoo’s roughly 7,000-strong workforce.
Boohoo, which sells clothing, shoes, accessories and beauty products for 16- to 40-year-olds, said of the outlook, “As a result of the impact that the macroeconomic and consumer background had on the group’s revenue in the first half, we anticipate expect a similar sales decline to continue later in the fiscal year if these conditions continue.”
It added, “The Board believes that by focusing on optimizing its operations in the near term, the Group will be well positioned to improve future profitability and financial performance through self-help through execution of key projects and cost efficiencies.”
Its sell warning coincides with similar warnings from competitors ASOS and Primark.
Shares, which had fallen 70% year-to-date, opened more than 3% lower but soon fell 9% to their weakest level in seven years.
Derren Nathan, Head of Research at Hargreaves Lansdown, said of Boohoo’s update: “Investors may be crying into their corn flakes today after reading Boohoo’s interim reports.
“Profits are being squeezed by both sales and higher costs and this is expected to continue.”
(c) Sky News 2022: Boohoo blames cost of living crisis for slowing global sales as outlook darkens