Boohoo, Asos Show Fast Fashion’s Still Trying to Right the Ship
Boohoo Group and Asos are still struggling to drum up sales as many consumers get back to shopping in stores after the pandemic, according their latest financial updates.
While both are overhauling operations, their sales are moving in the wrong direction. In contrast, U.K. retailers Next and JD Sports Fashion recently reported healthy sales gains as August’s retail sales rose 4.1 percent, according to the British Retail Consortium.
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Primark’s owner Associated British Foods recently said the Irish fast-fashion chain has “slightly better” profit expectations than it previously forecasted. ABF expects a 15 percent improvement in Primark’s fourth-quarter from a year ago. It’ll get there by raising some prices along with high-performing new stores, according to the company. “Celebrity and influencer collaborations” are also showing results for Primark, which recently unveiled a partnership with Rita Ora.
Boohoo Group plc
Rising costs and declining consumer demand weighed on Boohoo’s first half and led the e-tailer to drop its Fiscal Year 2024 outlook.
Boohoo lowered revenue guidance for the Fiscal Year ending Feb. 28, 2024. It now expects a 12 percent to 17 percent sales decline, instead of just a 5 percent decline. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margins remains in line with prior guidance at between 4 percent and 4.5 percent due to progress on gross margin and cost control. Adjusted EBITDA was also guided lower to 58 million pounds ($70.0 million) and 70 million pounds ($84.5 million) from the prior range of 69 million pounds ($83.3 million) to 78 million pounds ($94.2 million).
“Over the first half we have made substantial progress across key projects and initiatives, including the launch of our US distribution centre. We have seen significant improvements in sourcing lead times and invested in pricing to reinforce our value credentials,” said John Lyttle, Group CEO.
Boohoo has identified more than 125 million pounds ($151 million) of annualized cost savings. “Our confidence in the medium-term prospects for the Group remains unchanged as we execute on our key priorities where we see a clear path to improved profitability and getting back to growth,” Lyttle said.
The company’s adjusted loss before tax for the half reached 9.1 million pounds ($11 million), or 91 pence ($1.10), against an adjusted profit of 6.2 million pounds ($6.7 million), or 29 pence ($0.31), in the same year-ago period. Revenue fell 17.4 percent to 729.1 million pounds ($880.5 million) from 882.4 million pounds ($946.6 million).
The company said revenue in core brands fell 10 percent, consistent with prior guidance for group revenues to decline by 10 percent to 15 percent. Boohoo said it captured “supply chain deflation and lower input prices, and reinvested the savings to drive faster lead times and lower prices for customers.”
Boohoo’s new U.S. distribution center can process next day and express delivery orders. The company also fine-tuned the test and repeat model “with significantly improved lead times.”
Boohoo last week confirmed that it signed the Pakistan Accord, the first expansion of the International Accord for Health and Safety in the Garment Industry outside of Bangladesh.
Asos plc
Asos reported a 15 percent decline in quarterly sales, according to a report last month for the three months through Sept. 3.
However, the company expects a profitable year end period. It cited a strong start to the quarter in June followed by “weaker performance in July and August” and blamed a broader market decline. Asos used promoted to cut inventory by 30 percent year-over-year at the end of the quarter.
The company also pivoted to a faster stock model. Now 500 test-and-react products with two-week lead times result in 60 percent of launch selling through in seven days and inventory turning three times faster than average, according to the company. Given the “extremely positive results, Asos CEO José Antonio Ramos Calamonte said the company will ramp up this strategy.
“Asos has delivered on the Driving Change agenda and as a consequence is a leaner and more resilient business twelve months after its launch,” he said. “We continue to focus on bringing the best fashion and the most engaging proposition to our customers as we make progress on our journey to sustainably profitable and cash generative growth.”
Ramos Calamonte said the company is on track to return inventory to pre-Covid levels—reducing stock by 600 million pounds ($730 million)—by the end of Fiscal Year 2024. And while new high-fashion product is selling well, with a “50 percent increase in 4-week sell-through since the start of the year,” it only represented a small portion of sales in the quarter, he said.
Asos reported a bigger loss and revenue decline for the six months though Feb. 28. At the time Ramos Calamonte blamed inflation and return to in-store shopping for the e-tailer’s troubles.
The company is scheduled to report full year results on Oct. 25.
