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boohoo Group PLC on Wednesday swung to a first-half loss with earnings hurt by weak consumer confidence and a staggering number of clothing returns.
boohoo shares were down 8.8% at 33.49 pence each on Wednesday morning in London.
For the six months that ended on August 31, the Manchester, England-based online fast fashion retailer said return rates were ‘up significantly year-on-year’, the fast-fashion firm explained.
Revenue fell 10% year-on-year to £882.4 million from £975.9 million. It was up 56% from pre-virus levels.
In the UK market, revenue declined by 4.4% to £544.6 million from £569.6 million due to ‘softening through the second quarter as inflationary pressures increased and consumer demand appears to have been impacted by cost of living pressures’, it noted.
boohoo swung to a £15.2 million pretax loss from a £24.6 million profit a year earlier.
Boohoo said margins weakened markedly. Its adjusted earnings before interest, tax, depreciation and amortisation margin fell to 4.0% from 8.7%.
‘As a result of the impact that the macro-economic and consumer backdrop has had on the group's revenues in the first half, our expectation is for a similar rate of revenue declines to persist over the remainder of the financial year if these conditions continue,’ boohoo cautioned.
It lowered its margin outlook. boohoo now expects an annual adjusted Ebitda margin between 3% and 5%, trimmed from its previous 4% to 7% guidance range. While sales have jumped post-Covid, its margins have weakened. In the six months to the end of August 2019, its adjusted Ebitda margin was 10.8%.
Chief Executive Officer John Lyttle said: ‘Performance in the first half was impacted by a more challenging economic backdrop weighing on consumer demand. We remain confident in the long-term outlook, as we continue to offer customers unrivalled choice, inclusive ranges and great value pricing, giving them even more reasons to shop with us.’
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