How Boohoo Lost $113 Million Last Year
Boohoo Group Plc expects to get back in the black in the second half of the fiscal year. It said significant inventory and working capital improvements in the year ended Feb. 28 left it with with free cash flow of 30.2 million pounds ($37.7 million) despite a downturn in consumer spending.
In a Nutshell: “Our confidence in the medium-term prospects for the group remain unchanged, and as we execute on our key priorities we see a clear path to improved profitability and getting back to double digit revenue growth,” said Boohoo Group CEO John Lyttle.
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The company ended the year with 18 million active customers, a 9.5 percent year-on-year decline it blamed on customers returning to shopping in stores, a change Asos noted as well. Orders totaled 55.5 million pounds ($69 million), a 11.1 percent decrease from 62.4 million ($77.37). Average order value climbed 10.5 percent to 53.32 pounds ($66.56) from 48.16 pounds ($60.12), although items per basket fell 7.2 percent.
Boohoo said longer delivery times were part of the reason why the U.S. market, its second biggest, took the biggest hit. Returns rates surged past pre-pandemic levels.
“Distribution costs have remained high due to the ongoing elevated airfreight costs and remain materially above pre-pandemic levels. The opening of our U.S. warehouse in 2023-2024 will help to alleviate [the costs] going forward,” Boohoo said.
Boohoo said it can reach 500 million customers in key target markets. It offers “up to 4,000 new lines added every week across our brand portfolio.” It expects the PrettyLittleThing resale marketplace it launched in August 2022 to enhance its sustainability profile.
Boohoo ended the year with 36 percent less inventory, or 101 million pounds ($126.1 million) worth of goods. It’s focused on near- or nearer-shoring sourcing to facilitate speed to market and control costs. It automated the Sheffield distribution center in the third quarter and has new wholesale partnerships in the U.K., Europe, the Middle East and India.
Boohoo came under fire earlier this month when an anonymous vendor told The Times that the Misspap owner demanded a 10 percent discount from suppliers on old and new orders. Last year the e-tailer pushed payment terms out from 30 days to two months. A supplier fee implemented last year stems from a new plastic packaging rule.
Back in 2019, Asos also tried to squeeze a 3 percent discount from vendors, and blamed inflation as the reason why it asked for 2 percent last year.
Net Sales: Full-year revenue fell 10.8 percent to 1.77 billion pounds ($2.21 billion) from 1.98 billion pounds ($2.48 billion) a year ago.
By geographical market, U.K. revenue fell by 9.3 percent to 1.09 billion pounds ($1.36 billion), while revenue in the rest of Europe was down 5.8 percent to 206.5 million pounds ($257.8 million). Revenue in the U.S. dropped 19.5 percent to 363.7 million pounds ($454 million), and was down 2.0 percent to 107.0 million pounds ($133.6 million).
Earnings: The loss before taxes swelled to 90.7 million pounds ($113.2 million), against a profit before taxes of 7.8 million pounds ($9.7 million) in the same year-ago period.
For the year ahead ending Feb. 28, 2024, Boohoo projected revenue to be between flat and down 5 percent versus the prior year.
It expects a 10 to 15 percent revenue decline in the first half before turnover rebounds through the rest of the year.
It’s working on reducing returns, controlling costs and investing in international growth.
CEO’s Take: “Looking ahead, we are investing for the future growth of this business with automation, local fulfillment capacity in the U.S. and building global brand awareness,” Lyttle said. “We will deliver sustainable returns on these investments.”
