(Bloomberg) — Boohoo Group Plc shares plunged after the U.K. online clothing retailer warned that revenue growth may grind to a halt in the first half as cash-strapped consumers return more garments.
The adjusted Ebitda margin will probably be 4% to 7% in the full year, Boohoo also said Wednesday. That implies it will probably weaken from last year’s level of 6.3%. The company forecast full-year sales growth in the low single digits, which is much lower than its historic average. The stock fell as much as 14%.
Selling clothes online is getting tougher as retailers worldwide boosted their e-commerce business during the pandemic. Meanwhile, cut-rate discount upstart SheIn has been having exponential growth, and Inditex SA is trying to keep its sourcing advantages against other retailers. Hennes & Mauritz AB is also attempting to double its revenue by 2030.
“We view Boohoo as vulnerable to further market share loss,” wrote Sherri Malek, an analyst at RBC Europe.
The fast-fashion company slashed its sales projections twice last year as customers coming out of lockdown returned more clothes and the nascent U.S. business was hit by supply chain disruption and freight costs. Boohoo, whose brands include PrettyLittleThing and Nasty Gal, is also recovering from a labor supply scandal in 2020 which sparked governance changes at the e-commerce retailer.
Read more: Boohoo Defends Standards After Report of Labor Abuse at Supplier
The retailer said it has started a cost-cutting program and is operating with lower levels of inventory. To help tackle the problem of freight costs and delays, the company is looking to source more closely to the U.K.
Boohoo said in March that higher returns rates are expected to continue in the first half as customers buying outfits for special occasions are more likely to send them back than than those shopping for joggers and casual clothing during Covid lockdowns. The retailer said Wednesday that sales growth should pick up in the second half of the year with return rates easing and consumer demand normalizing.
The shares have fallen 35% this year.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
