Boohoo sales fall to continue as cost-of-living drags on customer demand

Boohoo has revealed that sales tumbled by a 10th over the past six months and expects them to keep falling as cost-of-living pressures weigh on customer demand.

The online fashion giant also told shareholders that profit margins are expected to be lower than previously predicted as a result.

The firm, which also owns the PrettyLittleThing and Karen Millen brands, swung to a pre-tax loss of £15.2 million for the six months to August 31, compared with a £24.6 million profit over the same period last year.

The loss was driven by a 10% slump in revenues to £882.4 million for the half-year compared with a year earlier.

John Lyttle, group chief executive, blamed the decline on a “more challenging economic backdrop weighing on consumer demand”.

Boohoo 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.

The group also warned that earnings margins are expected to be between 3% and 5% for the year due to cost inflation, downgrading previous guidance of between 4% and 7%.

Over the past half-year, the company recorded margins of around 4% after feeling pressure from “freight and logistics inflation”.

Mr Lyttle told investors he remains confident in the longer-term trajectory.

“Over the last three years the group has seen significant gains in market share achieved across our brand portfolio, particularly in the UK where our price, product and proposition resonate strongly with customers,” he said.

“We have a clear plan in place to improve future profitability and financial performance through self-help via the delivery of key projects, which will stand us in good stead as macro-economic headwinds ease.

“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.”

Analysts at Jefferies described the update from Boohoo as “disappointing” due to a lack of improvement over the latest quarter.

Derren Nathan, head of research at Hargreaves Lansdown, said: “Investors may well be crying into their cornflakes after a read of boohoo’s interims today.

“Profits are being squeezed both at the top line and through higher costs and this looks set to continue.”

Shares in the company fell by 14.2% to 31.5p in early trading.