Boohoo slashes profits forecast as consumers cut back

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Fast-fashion retailer Boohoo has slashed its annual sales and profit forecasts as consumers scale back purchases.

The UK company said on Tuesday that it expected revenues to decline between 12 per cent and 17 per cent in the 12 months to the end of February. In May, Boohoo said the drop would be 5 per cent at most.

The group was a winner during the pandemic-driven boom in online shopping but has since struggled with falling demand and rising costs. The retailer has lost more than 90 per cent of its value since its 2020 peak. Online retail rivals Asos and German-listed Zalando have experienced similar declines post-pandemic.

Boohoo, which also owns the Karen Millen and Debenhams brands, warned that a weaker top line would also hit profits in its current financial year. Adjusted earnings before interest, tax, depreciation and amortisation would be between £58mn and £70mn, it said, down from a previous range of between £69mn and £78mn.

Chief executive John Lyttle said “more than £125mn of adjusted cost savings that support our investment programme” had been identified and that his “confidence in the medium-term prospects for the group remains unchanged”.

Capital expenditure for this year has also been scaled back to £75mn from a range of between £80mn and £90mn. Boohoo released its updated forecasts as it reported a 17 per cent decline in revenue for the six months to the end of August to £729.1mn.

Shares in Boohoo fell 10 per cent in early trading.

Analysts at Shore Capital said the group’s new forecasts were “influenced by a slower than anticipated volume recovery and a continued focus on more profitable sales”.

Analysts at Peel Hunt said they expected Boohoo to experience substantial margin recovery in a couple of years but that in order for that recovery to materialise its sales would need to stabilise, “which remains the test into 2024”.

Boohoo suffered a shareholder rebellion over executive pay at the annual general meeting in June, with a third of shareholder votes cast against the annual remuneration report.

British retail group Frasers, controlled by retail entrepreneur Mike Ashley, increased its holding in Boohoo to 10 per cent at the beginning of September.