Boohoo tumbles as reality of online clothes shopping hits home

theguardian.com:

This time last year Boohoo had a stock market value of £4bn and seemed to be flying. It was lording it over the high street by buying up its deadwood brands for online rejuvenation; pandemic trading conditions were delivering a whoosh to revenues as the likes of Primark had to close their doors.

And now? Two profit warnings later – plus a downbeat outlook statement on Wednesday – Boohoo is full of grumbles. Customers are returning more items, the bane of an online retailer’s life, as they ease out of lockdown joggers and into smarter kit. Freight rates to the US have doubled and delivery times have extended, undermining the economics of selling fast-fashion items to Americans from warehouses in Burnley and Sheffield. The marketing bill has exploded because brands like Debenhams and Karen Millen don’t reinvent themselves. And the backdrop is consumer demand described as “subdued”.

Boohoo’s market value has fallen to £1bn and the share price stands at 70p, virtually the lowest it’s been since 2016, a year when annual revenues were £295m, as opposed to the near-£2bn just reported for the last financial period.

Whistling cheerfully John Lyttle, the chief executive, reckons Boohoo is “well-positioned to rebound strongly as pandemic-related headwinds ease”. Well, maybe, just don’t expect the bounce to come soon. Top-line profits, having just fallen 28% to £125m, will likely go sideways since margins this year are pencilled in for 4% to 7%, as opposed to 10% that Boohoo used to knock out reliably in the old days. Meanwhile, a mammoth distribution centre has to be constructed in Pennsylvania to solve the US headache. In basic terms, costs are rising and the demand picture is unclear with price rises (probably) on the way.

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