- Boohoo swings to first half loss
- Downgrades margin guidance
- Digital retailer is suffering from weaker demand and rising costs
Online fast fashion retailer Boohoo (BOO:AIM) saw its market valuation sink yet further as the announcement of a first-half loss was accompanied by an extremely bleak outlook and a big downgrade to guidance.
Shares in the embattled business fell 12.3% to 32.2p as reported revenue down 10% year-on-year in the six months to 31 August (though up 56% from pre-Covid levels as the company was at pains to point out). A less favourable comparison with the performance before the pandemic could be seen on margins which stood at 10.8% in the six-month period to the end of August 2019.
They have fallen alarmingly in the interim, the company swinging to a pre-tax loss of £15.2 million from a profit of £24.6 million a year earlier as EBITDA (earnings before interest, tax, depreciation and amortisation) margins weakened from 8.7% to 4%.
WEAK GUIDANCE
Boohoo also lowered margin guidance from a range of 4% to 7% to just 3% to 5% for the full year. This reflects rising cost pressures, including in part due to a greater volume of returns from customers. Notably the company introduced a return charge for Karen Millen and boohoo customers without ‘Premier’ accounts in July.
The company also moved from a net cash position of £98.4 million a year ago to net debt of £10 million.
Shore Capital analyst Eleonora Dani noted the appointment of Kourtney Kardashian as a new sustainability ambassador had received a ‘significant backlash among the public and was seen as an attempt to greenwash the fast fashion business’.
Dani added: This follows the Competition and Markets Authority’s scrutiny of eco-friendly and sustainability claims made by ASOS (ASC), boohoo and George at Asda about their fashion products in July. While ASOS stopped their ESG-related PR boohoo doubled down on it.
‘In our view, the announcement of an external CFO (Shaun McCabe from Trainline joins on 3 October) in June and the transition of Neil Catto to an executive director role highlight the magnitude of challenges ahead for the group.
‘This is another disappointing set of results showing both revenue and earnings decline, in addition to a weakening balance sheet.’
