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Boohoo lowers full year forecast

By Prachi Singh

16 Dec 2021

Business

Image: Boohoo Group media gallery

Boohoo Group witnessed gross demand growth in the third quarter compared to the first and second quarters of the financial year, however the company said, expectations for the financial year ending February 28, 2022 will be lower than previously guided.

Commenting on the third quarter trading and outlook, John Lyttle, Boohoo Group CEO, said: “The strong performance in our core UK market, across both our established and acquired brands, demonstrates the potential to capture and grow market share in key markets. In international markets, our proposition continues to be significantly impacted by ongoing service disruption due to the pandemic, which, in addition to increased recent consumer uncertainty, has weighed on our performance.”

Boohoo lowers outlook

The group now expects net sales growth to be 12 percent to 14 percent compared to previous guidance of 20 percent to 25 percent growth.

Adjusted EBITDA margin for the year is expected to be 6 percent to 7 percent compared to previous guidance of 9 percent to 9.5 percent, implying adjusted EBITDA of between 117 million pounds to 139 million pounds.

This, the company added, is due to significantly higher returns rates impacting net sales growth and costs, with continued extended delivery times impacting international demand, consequently driving lower returns on marketing expenditure, and significant ongoing pandemic-related inbound freight cost inflation.

Boohoo posts Q3 net sales growth of 10 percent

The company’s gross sales were up 28 percent in the three-month period and net sales were up 10 percent to 506.2 million pounds.

UK gross sales rose 58 percent versus FY21 and 102 percent versus FY22 and UK net sales were up 32 percent against FY21 and 78 percent versus FY20 to 320.3 million pounds.

International performance across the group’s brands and markets was impacted by significantly longer customer delivery times as a result of the pandemic, with all of international sales currently fulfilled from the company’s UK distribution network. Having seen strong signs of a recovery in September, revenue in Europe declined in the latter months of the period with increased consumer uncertainty.

Performance in the US has not seen the recovery previously anticipated due to the continued impact of reduced air freight capacity on delivery times to customers.

The company further said that significant and ongoing pandemic related inbound freight cost inflation impacted gross margin in the period, down 100bps year on year. This is estimated to impact EBITDA by approximately 20 million pounds in the financial year, the majority of which is in the second half.

The group continues to make significant investment into its infrastructure, including progressing plans for its US distribution centre, to support its future international growth ambitions with a network capable of delivering in excess of 5 billion pounds of net sales, and returning towards normalised growth rates of 25 percent per annum post-pandemic. In addition, the group’s confidence in its medium-term margin guidance for 10 percent adjusted EBITDA margin is unchanged.