Boohoo lowers guidance as more shoppers return clothes with shares plunging 22pc
Online fashion retailer Boohoo has lowered its guidance for the financial year as profits have been hit by higher return rates, supply chain challenges and inflation skyrocketing.
Boohoo said that it was expecting net sales growth to be between 12 and 14 per cent, for the financial year ending 28 February. It had previously forecast growth between 20 and 25 per cent.
Compared with the previous guidance of and adjusted EBITDA ranging between 9 and 9.5 per cent, Boohoo lowered it to between 6 and 7 per cent. The announcement led to shares plunging 22.42 per cent on Thursday morning, going down to 106.95p.
Shares were down 20 per cent on Thursday afternoon after the news.
In a trading update on Thursday morning, the company stated that – while in the the third quarter gross demand growth was higher compared with the previous two – profits were still hindered by higher return rates, supply chain disruption and pandemic-induced inflation surges.
Return rates registered a 12.5 per cent increase compared with last year, while the pandemic-induced surge in inflation rates impacted Boohoo’s gross margin, down by 100bps year-on-year.
Despite ongoing issues, the group managed to bring home a few positive results including a 28 per cent increase in gross sales, with UK net sales going up 32 per cent compared with the same time last year. Boohoo’s currently liquidity amounts to over £170m, with £70m in net cash.
“The group has gained significant market share during the pandemic,” said Boohoo’s chief executive John Lyttle. “The current headwinds are short term and we expect them to soften when pandemic related disruption begins to ease.
“Looking ahead, we are encouraged by the strong performance in the UK, which clearly validates the boohoo model.”