Boohoo has issued a profit and sales warning as the cost of living crisis causes a slump in shopper demand for the fast-fashion brand’s products.
The online clothing retailer, whose brands include Pretty Little Thing and Nasty Gal, reported a 10% fall in total revenues to £882m in the half year to 31 August and said it now expects annual sales to be down about the same level.
The company, whose market value has slumped by 87% in the last year, had previously suggested low single-digit revenue growth in its financial year.
Boohoo said its performance also reflected a significant increase in product returns – in July, it started charging customers £1.99 for returning unwanted items – as well as increased delivery times for goods sold in overseas markets.
After its profit and sales warning, shares slumped more than 10% in early trading to their lowest level since 2016.
Adjusted profits were down 58% to £35m for the half year, with the company warning that its profit margin would fall to between 3% and 5%, having previously indicted a 4-7% range.
“Performance in the first half was impacted by a more challenging economic backdrop weighing on consumer demand,” said John Lyttle, the chief executive at Boohoo. “We have a clear plan in place to improve future profitability and financial performance through self-help via the delivery of key projects, which will stand us in good stead as macro-economic headwinds ease.”
Sales in the UK, which account for more than 60% of group revenues, declined by 4%, while international sales fell by 17%.
Joshua Warner, a market analyst at City Index, said: “The brakes appear to have been applied to non-essential spending as consumers are forced to stretch their pay cheques further. That curtailment in demand comes at an unfortunate time for Boohoo and other retailers that are seeing their margins hammered from every angle.”
