FTSE: Boohoo posts £15m loss as cost of living and deteriorating economy hit profits
Shares in Boohoo (BBO.L) slumped on Wednesday after it posted a loss and sounded the alarm that full-year sales and profits will be lower than expected.
It blamed the worsening economy and a higher level of product returns from customers amid the cost of living crisis.
The fast-fashion retailer revealed a slump in sales in the six months to 31 August as it was affected by higher returns and cost of living pressures on customer spending.
As a result the online fashion group said it swung to a pre-tax loss of £15.2m ($16.2m) in the first-half, compared with a £24.6m profit over the same period last year. Core earnings fell 58% to £35.5m.
Chief executive John Lyttle said the half was "impacted by a more challenging economic backdrop weighing on consumer demand" and that Boohoo had "a clear plan in place to improve future profitability and financial performance through self-help".
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Revenues at the firm fell 10% in the six months to August to £882m, with a similar decline in sales predicted in the next six months.
It now expects an earnings margin in the year to February 2023 of between 3% and 5%, down from previous forecast forecast range of between 4% and 7% and analyst forecasts of 4.8%.
Full-year sales are expected to fall by around 10%, similar to the level in the first six months, against expectations for growth of around 2%.
Company shares tumbled as much as 9% to 33.6p in early trade in London. That is below the initial public offering (IPO) price of 50p in 2014 when it listed despite sales expanding during the time.
The company said the sales decline was partly caused by "significantly" higher return rates, a "softening" in UK customer demand during the second quarter and a 17% slump in international revenues, where it has been impacted by longer delivery times.
It told shareholders it expects "a similar rate of revenue declines to persist over the remainder of the financial year" if current economic uncertainty and pressure on household budgets continue.
Lyttle added that the group "remained confident in the long term outlook, as we continue to offer customers unrivalled choice, inclusive ranges and great value pricing".