British online fashion retailer, Boohoo, has reportedly warned that its sales will be likely affected during the upcoming festive season, after reporting a drop in its half-year profits.
The firm posted a 10% fall in sales, coming at £882.4 million ($951 million) in the first half of the year ending August, and has warned of a similar fall in revenue rate in the ‘golden’ period.
Citing inflation-driven costs and slow sales, Boohoo stated that its full-year EBITDA margins will likely come between 3-5% from the earlier guided 4-7%.
This warning follows Boohoo’s bottom line crash in the first half of its financial year, with the company reporting that its adjusted pre-tax profit during the period fell 90%, coming at £6.2 million ($6.7 million).
The adjusted EBITDA dropped 58% to £35.5 million ($38 million), making up 4% of the revenue, down from 8.7% last year. Gross margins also fell to 52.5% in the six-month period from 54.6% last year.
Sales in Boohoo’s key market, the UK, declined by 4% as well, with the retailer saying that the sales softened in the summer and cost-of-living pressures had a strong impact on consumer demand.
But through all that, the fast fashion retailer’s gross sale returns rose 4%, signifying the ongoing improvements and underlying growth in average spend per customer and order frequency.
However, returns rates were significantly higher year-on-year, having surpassed pre-pandemic levels.
John Lyttle, CEO of Boohoo, stated that the first half’s performance was impacted by a challenging economic backdrop that affected consumer demand.
However, Lyttle is confident in the group's long-term outlook, adding that it recorded significant gains in market shares in the last years across its brand portfolio and especially in the UK where its prices, products, and proposition resounded well with the customers.
The retailer group’s market cap also dropped under £500 million ($539 million) this week, a 90% drop from its record high of more than £5 billion ($5.3 billion) in June 2020, while its market value dropped from the 2020 peak of over £570 million ($614 million) to £60 million ($65 million).
Source credit: https://www.retailgazette.co.uk/blog/2022/09/boohoo-warns-on-profit-as-cost-of-living-weighs-on-demand/