Boohoo sales soar but profits hit by shipping cost rises and investments

Online fashion giant Boohoo has revealed it doubled its market share in the UK and US since the start of the pandemic but profits plunged following heavy investment during the year.

Sales rose 20% to £975.9 million in the six months to the end of August compared with a year earlier, but pre-tax profits dropped 64% to £24.6 million.

The hit to profits included higher shipping costs, which were £26 million higher than pre-pandemic levels.

It sent traders into a frenzy, as expectations were missed, with shares plunging nearly 10% in early trading.

New rules following Brexit also saw profit margins reduce from 57.8% to 53.6% due to the extra checks required at customs, the company said.

Bosses also revealed Boohoo took a hit as the percentage of garments sent back has returned to pre-pandemic levels and the easing of lockdown restrictions in the period saw shoppers return to the high street.

But they were confident for the rest of the year, claiming the company is expected to emerge from the pandemic in a far stronger position compared to two years ago.

Heavy levels of investment included marketing and integrating new brands, including department store Debenhams and former Arcadia brands Dorothy Perkins, Burton and Wallis.

There were also two warehouse moves in Wellingborough and Daventry, and the purchase of new offices in central London.

Chief executive John Lyttle said: “We are delighted to have doubled our market share in key markets such as the UK and US, have significantly expanded our target addressable market through selective acquisitions and are excited about the global potential for all of our brands.”

Looking forward, the company said it expects stronger sales in the second half of the financial year, although profits could continue to be knocked by higher costs, including freight prices and increased wages for staff in distribution centres.

Total spending on infrastructure is now expected to be around £275 million this year, compared with previous estimates of £250 million.