Boohoo Group PLC (LON:BOO)’s revenues fell 13% to £637.7m in the four months to 31 December, ignoring the effect of exchange rates. This was in line with the group’s previous expectations. UK revenues declined 11% compared to a “strong” prior year, and all other regions declined, including the USA, which was down 17%. The group said longer delivery times are affecting the group’s position.
Gross margin for the period was 49.7% and is expected to improve year on year during the final quarter, reflecting fewer discounts on boohoo’s clothes.
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Inventory has been significantly reduced, down 27% year on year. Combined with tighter cost controls, cash generation has improved. Net debt is expected to be equivalent to under one times cash profits at the end of the financial year.
As global supply chain disruption eases, the group to expects to see some relief to freight rates. Overall cost growth is expected to begin to moderate as the year progresses.
Full-year reported revenues are expected to decline 12%.
The shares fell 5% following the announcement.
Boohoo's Struggle
Aarin Chiekrie, Equity Analyst at Hargreaves Lansdown:
“Boohoo has struggled with the transition back to in-store shopping in 2022, and the Christmas period didn’t provide much relief. Festive period revenues fell across all regions, most notably down by double-digits in its two largest markets, the UK and USA.
This weaker trading echoes a similar performance from online-only peer ASOS plc (LON:ASC), who also saw sales fall. This comes as a stark contrast to some high street retailers such as NEXT plc (LON:NXT) and Marks and Spencer Group Plc (LON:MKS), who managed to post sales growth despite battling through a cost-of-living crisis.
As revenues are expected to decline further, boohoo is looking to tightening its belt in a bid to meet margin targets. While we commend cost-cutting and improving efficiencies, it’s not a long-term solution. These measures can only be taken so far - eventually you run out of holes in your belt.
With freight costs falling and cost inflation normalising, boohoo will have to begin growing the top line again if it wants to improve its fortunes. The USA market is seen as the big growth market for the group, but it’s struggled to make real headway there yet.”
