Boohoo share price soars as profits halve: Brits ditch fast-fashion and head back to the high street
Online fashion retailer Boohoo said its profits halved, as the cost of living crisis continues to hit consumers’ spending and Brits flock back to physical stores.
Pre-tax profits for the group halved during the 12 month period ended 28 February 2023 to £63.3m, down 49 per cent, with revenues dropping 11 per cent to £1.77bn.
Sales at the fashion retailer tumbled to £1.77bn, 11 per cent down on last year, while UK revenues were down nine per cent against last year.
Boohoo, which own PrettyLittleThing and Nasty Gal, reported bumper profits during the pandemic, as customers flocked to buy online and high street shops shut.
However, it has had a torrid time post-covid, seeing its share price tumble amid supply chain issues, high inflation and tough competition from rivals such as Shein.
This morning, it’s share price was up more than nine per cent.
Consumers have also flocked back to physical shops, prompting a slowdown in online shopping.
John Lyttle, Boohoo’s CEO, said: “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.”
Not all bad for Boohoo
While Boohoo’s profits slid off the decline in online shopping, there was also optimism as its share price went up by almost 10 per cent this morning.
Russ Mould, investment director at AJ Bell. added that “it’s like the tables have turned, with previous winners now slipping back and laggards making a comeback.
“Previously a fallen angel, Boohoo certainly fits the bill after its share price jumped 15 per cent.
“While it saw a decline in profits and margins, there was a sense that some analysts had been too pessimistic with their forecasts. Today’s figures have prompted some chunky earnings upgrades, which have acted as key drivers for the share price.
“A slump to an annual pre-tax loss shows how exposed it has been to rising costs coming out of the pandemic. However, the company has made real progress on its cash flow and with getting its borrowings down.”
“Boohoo seems to be getting its house in order with a reduction in inventory and investments into automation and logistics. But the big unknown is how long it will take to revive growth in the business.”
Zainab Atiyyah, Analyst at Third Bridge, said: “Online shopping is seeing a bit of a slowdown lately, as consumers flock back to physical stores. Online-only fashion retailers like Boohoo are feeling the pinch, with Next and M&S gaining ground.”
“Boohoo’s margins are going to be tight this year, as most of their customers have come to expect big discounts. Plus, plans to bring manufacturing closer to home will add to their overheads. However, there is some good news on the horizon, as freight rates and raw material costs begin to ease.”
She added: “Boohoo’s longer-term goal should be to expand outside the UK, and focus on winning market share from competitors like Shein and Asos.”