Boohoo profit falls 94%; shares down 80% in year

Shares of Manchester-based online fashion giant Boohoo fell as much as 15% on Wednesday after it reported that profit before tax fell 94% to £7.8 million in the year to February 2022 — and warned it expects revenue percentage growth in its current financial year will be low-single digits.

Boohoo said: “It is anticipated that revenue percentage growth will be low-single digits, and adjusted EBITDA margins for the year are expected to be between 4% to 7% as the group expects to continue to be impacted by pandemic-related factors that negatively impact costs within its supply chain and international competitive proposition.”

Boohoo shares are now down about 80% for the past 12 months, currently trading around 68p to give the group a stock market value of around £870 million.

Boohoo’s brands include Boohoo, PrettyLittleThing, Nasty Gal, MissPap, Karen Millen, Coast, Oasis, Warehouse, Wallis, Dorothy Perkins, Debenhams and Burton.

The Manchester firm said its revenue rose 14% to £1.983 billion, up 61% on 2020.

However, Boohoo said: “Growth has however been impacted by three factors: firstly, returns rates increased significantly in the second half of the year ahead of both expectations and pre-pandemic levels; secondly, consumer demand has been subdued as a result of lockdowns in key markets throughout the year; and thirdly, our proposition internationally has been negatively impacted as a result of extended delivery times.

“The group has continued to invest significantly through the last year, including rebuilding and relaunching four new brands in FY2022, incurring costs that will be leveraged in the coming years as the brands scale.

“Our distribution network has been extended through the opening of two new distribution centres and progress on our automation project in Sheffield, expected to go live in the new financial year, continues apace.

“We have also announced our intention to open a distribution centre in the USA to transform our customer proposition.

“Adjusted EBITDA, at £125 million, has remained broadly flat compared to pre-pandemic levels and has declined compared to the excellent results delivered in FY2021, due to lower growth than anticipated, a significant increase in outbound carriage costs due to a lack of airfreight capacity and inbound shipping costs rising equally steeply, collectively impacting EBITDA by £60 million, as well as higher marketing costs as we invest in our newly acquired brands.”

On dividends, Boohoo said: “The directors do not recommend the payment of a dividend so that cash is retained in the group for capital expenditure projects that are required for the rapid growth and efficiency improvements of the business and for suitable business acquisitions.”

In its outlook, Boohoo said: “In the first half of the financial year, the trends impacting performance in the second half of FY2022 are expected to continue, including: uncertain consumer demand; tough comparatives as well as reduced levels of net sales growth due to the annualisation of elevated returns rates year on year; and sustained freight-related headwinds.

“As a result, the group currently expects revenue growth to be broadly flat in the first half of FY2023, as relatively higher returns rates lead to net sales being down year on year in the first quarter, with a return to growth in the second quarter.

“For the first half of FY2023, Adjusted EBITDA margins are expected to improve from the level achieved in the second half of H2 FY2022.

“Performance is expected to improve in the second half of the year with sales growth accelerating as the group annualises high returns rates and normalising consumer demand, with profitability improving as it benefits from key strategic initiatives and leveraging of overheads.”

Boohoo CEO John Lyttle said: “Over the past two years, we have significantly increased market share in our core geographies of the UK and the US, and we have grown active customer numbers by 43% across the group to 20 million.

“Our focus over the past two years has been on investing to build a strong platform, with the right infrastructure, supported by increased capacity to better serve our customers.

“In the year ahead we are focussed on optimising our operations through increasing flexibility within our supply chain, landing key efficiency projects and progressing strategic initiatives such as wholesale and our US distribution centre.

“This will ensure that the group is well-positioned to rebound strongly as pandemic-related headwinds ease.”