Shares of Manchester-based online fashion giant Boohoo rose as much as 14% on Tuesday after CEO John Lyttle spoke of “a clear path to improved profitability and getting back to double digit revenue growth” despite the firm reporting that its revenue fell 11% to £1.769 billion in the year to February 28, 2023.
Boohoo also said it had made a loss before tax of £90.7 million, compared with a profit of £7.8 million a year before. No dividend is proposed.
In its outlook and guidance, Boohoo said that for the year ending February 28, 2024, revenues are expected to be between flat and a decline of 5% versus the prior year, with increased emphasis on driving profitable sales.
“In the first half, revenues are expected to decline by 10% to 15% as a result of this action being taken,” said Boohoo.
“In the second half of the year, the group expects to return to revenue growth as it benefits from the investments being made across price, product and proposition under the Back to growth strategy.
“Adjusted EBITDA for FY24 is expected to improve year on year as a result of operational gains, cost efficiencies and cost deflation in our supply chain, with adjusted EBITDA margins of 4% to 4.5%, and adjusted EBITDA of between £69 million to £78 million, in line with market expectations.”
Boohoo CEO John Lyttle said: “Over the last three years, the group has achieved significant market share gains.
“Looking ahead, we are investing for the future growth of this business with automation, local fulfilment capacity in the US and building global brand awareness.
“We will deliver sustainable returns on these investments.
“We will continue to give our customers the latest trends, outstanding value and a great experience.
“Our confidence in the medium-term prospects for the group remain unchanged, and as we execute on our key priorities we see a clear path to improved profitability and getting back to double digit revenue growth.”
REACTION:
Victoria Scholar, Head of Investment, Interactive Investor: “Boohoo reported adjusted full-year earnings (EBITDA) of £63.3 million, beating expectations for £62.1 million but falling 49% from £125.1 million last year. Revenue slumped 11% to £1.77 billion.
“Shares in Boohoo have been on the decline in recent weeks with Asos’s recent first half loss adding to the downward pressure.
“With low expectations going into this set of numbers, Boohoo is enjoying a reprieve today from the doom-and-gloom thanks to earnings which came in slightly ahead of consensus estimates.
“Even though the stock is rallying by over 14% today, shares are still down around 20% over the past month and are down roughly 45% over a one-year period suggesting there is still a long way to go to reinvigorate the bulls.
“Boohoo operates in a highly competitive market with a slew of low price point, fast fashion competitors.
“Squeezed household budgets amid the inflationary backdrop means less disposable income among its customers to spend on non-essential fashion items.
“And the e-commerce pandemic era online shopping boom has faded with many consumers enjoying going back to physical stores again last year.”
Aarin Chiekrie, equity analyst at Hargreaves Lansdown: “Boohoo’s full year results were a painful read for investors.
“Revenue declined across all geographies, most notably down by double digits in the USA, which is seen as the group’s route to major growth.
“Boohoo’s spent heavily on increasing capacity and that’s already taking its toll on profits. If this turns out to be a systemic slowdown in sales growth, not just a blip, those extra warehouses will become an even bigger problem for profits.
“The world of fast fashion is a competitive place, by the time the group’s US distribution network becomes fully operational in 2024, its American shoppers may well have moved on.
“Despite falling revenues and collapsing profits, the shares popped on the news that things weren’t quite as bad as feared.
“But turning the ship around will not be an easy task. It’ll require revenue growth, but given that active customer numbers fell 10% this year, we’re doubtful of any swift turnaround in the group’s fortunes.”