Slowdown comes for the boohoo group, says GlobalData

Following today’s release of the boohoo group’s figures for FY2021/22; Emily Salter, senior apparel analyst at GlobalData, a leading data and analytics company, offers her view: “After issuing an uncharacteristic profit warning in December 2021, the boohoo group has reported subdued growth of 13.6% in its FY2021/22, with sales increasing by £237.5m to £2.0bn. 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 £114.7m 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.

“The question of how successful its acquired brands are also remains, with the group having increased marketing activities for brands such as Karen Millen and Dorothy Perkins on social media and out-of-home advertising, as well as partnering with celebrities, with Christine Lampard for Wallis and Laura Whitmore for Oasis, utilising its expertise in this area. The group also seems to be using these smaller brands to experiment with sustainability initiatives, with Oasis partnering with Thrift+ to enable resale of its products and launching occasionwear on rental platform Hirestreet, making its pieces more accessible to a wider range of shoppers. This is the boohoo group’s first step into the rental market, and one they should follow with Karen Millen and Coast, but the model would not suit the lower prices and quality of its core brands.”