boohoo group profit falls into the red as cost of living crisis hits demand, says GlobalData – Retail Times
Following today’s release of the boohoo group’s figures for H1, FY2022/23; Darcey Jupp, apparel analyst at GlobalData, a leading data and analytics company, offers her view: “Despite building its reputation on low-cost, value apparel, the boohoo group has proven it is not immune to the cost of living crisis, ending H1 FY2022/23 with revenue down £93.5m to £882.4m and an operating loss of £11.8m. As a result, the group has slashed its profit guidance for the year, now anticipating EBITDA margins to be 3-5%, down from 4-7% previously. The group’s topline was largely dragged down by troubling performance in the US, where revenue tumbled 29.2% to £177.4m despite the group’s expansion plans in the region. This is likely due to it struggling to compete against rival fast fashion giant Shein, which has seen rapid growth in the country, fueled by its ultra-low prices and wide product range.
“In its home market the UK, revenue fell 4.4% to £544.6m in H1 FY2022/23. While the strong comparatives in the year prior (+32.4%) due to lockdowns in Q1 must be noted, news has recently broke of the boohoo group cancelling orders with UK suppliers, signaling a wider downturn in demand. Prolonged inflation and the increased likelihood of significant interest rate rises in the UK will be hitting consumers’ discretionary incomes more than anticipated, so order cancellations are likely to be a common occurrence in the coming months, with fast fashion players due to be some of the hardest hit, as though they often offer low prices, they rely heavily on selling high volumes. The percentage of UK shoppers in GlobalData’s monthly survey who plan to buy fewer clothing & footwear products as a result of rising cost of living grew 10.2ppts between May and September to 43.4%, proving that volumes are becoming increasingly strained.
“In July 2022, the CMA launched an investigation into boohoo’s sustainability claims alongside other fast fashion players ASOS and George, suggesting that the ranges the retailers claimed to be sustainable are in fact examples of greenwashing and therefore deceiving shoppers. While no further information has been released about the case, the boohoo group has continued to launch new supposedly sustainable collections across its brands, alongside PrettyLittleThing’s resale marketplace which went live in late August, allowing consumers to buy and sell secondhand products. Launching PLT Marketplace with a range of pre-owned clothes from creative director Molly-Mae Hague was likely successful, as her loyal fanbase will be keen to purchase products she has worn. However, though external brands can also be listed on the platform, most items are currently from PrettyLittleThing itself, and it must be considered that the brand’s products are not made to last, so true circularity will be restricted.”
Josh Holmes, senior consultant at Retail Economics, said: “These results confirm that all is not well at the retailer. There’s no doubt about it, they are navigating through particularly challenging times with the business model under pressure.
“Following a pandemic-fuelled boom, many shopper habits have snapped back into place more forcefully than had been expected. Rising returns and weaker demand have collided with spiralling input and operating costs, which has hit profitability hard.
“The cost-of-living crisis is also hitting Gen Z consumers disproportionately given their typically lower wages and squeezed disposable incomes. It has encouraged many people back into stores as they avoid costly delivery and returns, and can ill-afford to wait for refunds with spare cash under so much pressure.
“The international operation has also been hampered by ongoing disruption in supply chains which looks set to continue well into next year. There are some signs of improvement, but with such significant headwinds in the UK from inflation, rising interest rates and recession, it feels like things may get worse before there are signs of improvement.”
Rosalind Hunter, partner at global consultancy Simon-Kucher & Partners, said: “Retailers and fast fashion brands, like boohoo, in particular have been acutely aware of the impact the cost-of-living crisis has had – and will continue to have – on consumer spending habits.
“Having enjoyed significant sales growth during the pandemic as consumers turned to online retail therapy to cope with lockdowns, boohoo has seen a fall in revenue in their latest results released today. Net revenue in the UK, their main market, fell 4% versus 2% in wider Europe. The largest drop actually came from the US with a fall of 29%, although delivery issues are also impacting performance in this market.
“The details within the report show average the price has increased by 26% with orders falling 10% and conversion falling as well. Compared to 2019, the growth in the business is still clear with active customers up 47% and orders up 36%, although conversion is now lower than 2019 levels which would indicate consumers are definitely being more cautious also reacting to increases in average basket value.”
Following today’s release of the boohoo group’s figures for H1, FY2022/23; Darcey Jupp, apparel analyst at GlobalData, a leading data and analytics company, offers her view: “Despite building its reputation on low-cost, value apparel, the boohoo group has proven it is not immune to the cost of living crisis, ending H1 FY2022/23 with revenue down…
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