Boohoo has revealed a huge drop in sales as extended delivery times and the cost of living crisis continued to bite.
But the Manchester-headquartered fashion group said it would still hit expectations during its financial year despite the massive drop in sales during the last few months of 2022.
In a statement issued to the London Stock Exchange, Boohoo said its UK and US divisions had driven an 11% fall in sales across the group in the four months to the end of December.
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The decline did not come as a surprise to either Boohoo or its shareholders, who had been warned that sales were set to drop over the period.
As a result, Boohoo was able to say on Thursday that it expects earnings before interest, tax, depreciation and amortisation to measure up to market expectations.
Revenue is set to drop by around 12% over the financial year, the business said.
So far, in the 10 months to the end of December, revenue dipped from a little under £1.7bn to just over £1.5bn, a 10% fall.
Chief executive John Lyttle said: "Performance in the period is in line with expectations and reflects the normalisation of the channel shift online over the last 12 months, but demonstrates the significant market share gains the group has made over the last three years.
"Looking ahead, whilst the demand outlook is uncertain due to macro-economic factors, cost inflation is expected to begin to moderate in the second half of the year."
So far this year, the US has been by far the worst-performing market for Boohoo. In the 10 months to the end of December revenue dropped 23% to £306.3 million when compared to the same period a year earlier.
The silver lining in the country is that this malaise seems to be easing somewhat. In the last four months of the calendar year revenue dipped by 12%.
In the UK – Boohoo’s biggest market – revenue fell by 11%.
Mr Lyttle said that the business is trying to manage costs but will continue to invest where needed.
"We have reduced inventory by 27% year on year and with this focus on careful inventory management, strong cost control and cash management, we will continue to drive operational and cost efficiency across the business," he said.
"The group has continued to invest in key strategic priorities that will enable future growth, and the progress made gives us confidence that as macro-economic headwinds ease it will be well-positioned to rebound strongly."
The figures come after BusinessLive reported that Boohoo was preparing to cut around 100 jobs from its London office connected with the former Arcadia brands Burton, Dorothy Perkins and Wallis which it rescued from administration.
At the end of 2022 it was also revealed how the former Arcadia brands and Debenhams had performed over their most recent financial years.
Analysis
Amisha Chohan, head of small cap strategy at Quilter Cheviot, said: "Boohoo had a tough third quarter, but crucially sales were in line with expectations and the group maintained its full year earnings guidance.
"Over the past 18 months, the group has struggled with a plethora of headwinds including high inflation from gas prices and freight costs, increased return rates and slow delivery times to the US. Some of this inflation should ease, particular container costs, gas prices and the cotton price, which should help improve margins by this time next year.
"Underpinned by its agile test-and-repeat model alongside improvements in supply chain speed, boohoo is successfully managing its stock position despite the continued challenges in the trading backdrop. Inventory has been reduced and we saw elevated clearance activity at the end of last year, and as such management is expecting a gross margin improvement in the final period.
"Boohoo has also signed the lease for its new Pennsylvania warehouse, expected to launch with a phased approach over 2023 and early 2024, taking its brands into the US. We expect Boohoo will become much more active around Black Friday and other sales events to recruit new customers.
"Ultimately, the share price weakness over the past year relates to weak international sales, high inflationary pressures adversely impacting margins and a normalisation of online shopping trends post-covid. The founders own around 20% of the business, so there is always a chance they take it private.
"Boohoo has other risks too, particularly in its supply chain, which could result in the possibility of a US import ban and or reputational damage. Furthermore, the retail environment is cutthroat right now with inflationary pressures impacting on profits and competitors stealing marking share. We think it has the right structures in place to benefit from the economic recovery, when it plays out, but also mindful that there are ever present risks for the business."
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