For the year ended 28 February, Boohoo Group reported statutory profit before tax of GBP7.8m (US$9.7m), down from GBP124.7m in 2021. The figure was also down by 92% on the GBP92.2m reported in 2020.
The online giant has said with inflation impacting prices it is now moving to maximise efficiencies in its operating model and mitigate where possible before passing prices on to consumers.
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Adjusted EBITDA fell by 28% to GBP125.1m from GBP173.6m a year earlier, with Boohoo noting in addition to increased costs, growth was impacted by three factors: higher returns rates in the second half of the year, subdued consumer demand as a result of lockdowns, and extended delivery times which impacted its international business.
Adjusted profit before tax fell 45% at Boohoo Group to GBP82.5m, while revenue grew 14% to GBP1.98bn year-on-year.
Boohoo said adjusted EBITDA, while broadly flat on pre-pandemic levels, fell against 2021 due to lower growth than anticipated, a significant increase in outbound carriage costs due to a lack of airfreight capacity and inbound shipping costs rising equally steeply. There were also higher marketing costs as the group invests in its newly acquired brands.
“Over the past two years, we have significantly increased market share in our core geographies of the UK and the US, and we have grown active customer numbers by 43% across the group to 20m,” says CEO John Lyttle. “Our focus over the past two years has been on investing to build a strong platform, with the right infrastructure, supported by increased capacity to better serve our customers.
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By GlobalData“In the year ahead we are focussed on optimising our operations through increasing flexibility within our supply chain, landing key efficiency projects and progressing strategic initiatives such as wholesale and our US distribution centre. This will ensure that the group is well-positioned to rebound strongly as pandemic-related headwinds ease.”
Boohoo Group outlook
Boohoo says it believes the pandemic-related external factors that have impacted performance in FY22, will continue for the year ahead. The group’s priorities, therefore, are focussing on optimising its operations, including:
- Sourcing and freight: Targeting increased sourcing from near-shore markets, leveraging the flexibility that exists in the group’s diverse supplier base to reduce lead times that have been negatively impacted through global supply chain challenges in FY2022 and exposure to fluctuating inbound freight costs that remain elevated.
- Stock management and returns: Operating with lower levels of inventory through tighter stock management and increased levels of open to buy, giving greater flexibility to react to changes in demand mid-season. Whilst returns rates are expected to remain around current levels during FY2023, the group will annualise material increases in return rates in the first half of the new financial year.
- Cost management: The group has commenced a cost efficiency programme, and by scaling recent acquisitions that have already received significant investment, overheads across the group can be leveraged.
- Unlocking strategic enablers: Focusing resources and capital investment into key projects to support strategic growth, including: onboarding new wholesale partnerships; upgrading the Debenhams technology platform; going live with automation in our Sheffield distribution centre; and progressing our US distribution centre ahead of go-live in 2023
By focusing on these areas, the group believes it will be in a position of greater financial and operational strength, and well-positioned to rebound strongly as pandemic-related headwinds ease, allowing it to capitalise on its significantly expanded target addressable market, returning towards normalised growth rates of 25% per annum post-pandemic and adjusted EBITDA margin rebuilding back to 10%.
For the financial year ending 28 February 2023, the group is focused on retaining what it called the significant market share gains it has made over the course of the last two years. With current short-term cost inflation impacting consumers, Boohoo intends to maximise efficiencies in its operating model and mitigate where possible before passing prices onto consumers.
It is anticipated that revenue percentage growth will be low-single digits, and adjusted EBITDA margins for the year are expected to be between 4-7% as Boohoo expects to continue to be impacted by pandemic-related factors that negatively impact costs within its supply chain and international competitive proposition.
The group currently expects revenue growth to be broadly flat in the first half of FY2023, as relatively higher returns rates lead to net sales being down year on year in the first quarter, with a return to growth in the second quarter. For the first half of FY2023, adjusted EBITDA margins are expected to improve from the level achieved in the second half of H2 FY2022.
Boohoo says performance is expected to improve in the second half of the year with sales growth accelerating as the group annualises high returns rates and normalising consumer demand, with profitability improving as it benefits from key strategic initiatives and leveraging of overheads.
Subdued Boohoo Group growth following profit warning
Emily Salter, apparel analyst at GlobalData notes after issuing an uncharacteristic profit warning in December, the Boohoo Group has reported subdued growth of 13.6% in its FY2021/22.
“Though the group was up against strong comparatives of 41.3% growth as it excelled during the pandemic, benefitting from the shift to online during lockdowns, this deceleration has spooked investors, with its share price having fallen 78% in the last year. However, this slowdown was inevitable as the group simply could not sustain such high levels of growth. This will be apparent in FY2022/23, with the group expecting revenue growth to be in the low single digits, a sobering slowdown as it continues to feel pressures from the supply chain crisis, elevated returns rates and uncertain consumer demand. The Boohoo Group’s operating profit was GBP114.7m lower than last year as the costs of shipping and air freight have spiralled, especially as its supply chain is so focused on the UK—a factor that has both led to its success in the UK while simultaneously subduing its overseas sales.
“The Boohoo Group’s international performance dragged down its total sales, with sales in the Rest of Europe and Rest of World falling by 10.4% and 9.3% respectively, and rising by a muted 3.8% in the US. The US had previously been the group’s best performing region, with PrettyLittleThing doing exceptionally well in the country as it resonated well with shoppers, boosted by US-centric influencer partnerships. However, the group has been unable to meet shopper expectations of delivery times due to its heavy reliance on its UK distribution network, with plans to open a US warehouse in 2023 not coming soon enough. The group should also consider opening a distribution centre in the EU to allow it to better serve its shoppers in mainland Europe.”
Last week, Boohoo-owned Oasis announced a rental scheme available to customers following its partnership with Hirestreet, a move industry onlookers said the online behemoth should replicate across more of its brands.
