Boohoo has cut more than 1,000 jobs and dived into debt after its losses soared and sales slumped 13% amid heavy competition from the Chinese online seller Shein and the revival of the high street after the pandemic lockdowns.
The online fashion specialist, which owns Debenhams, Warehouse, Dorothy Perkins and Pretty Little Thing, said it had built up net debts of £95m in the year to the end of February – down from almost £6m of net cash a year before – after losses widened 76% to £160m and sales fell to £1.8bn.
Its chief executive, John Lyttle, blamed the group’s problems on “difficult market conditions, caused by high levels of inflation and weakened consumer demand”, and said it planned to make savings of £125m in the year ahead after putting more automation into its Sheffield warehouse, closing one in Daventry, and opening a new warehouse in the US.
The latest accounts show that Boohoo, which was founded in Manchester in 2006, had cut more than 1,000 jobs in the year as it faced an 11% drop in the number of active customers using its site, each of whom spent less and visited less often.
Stephen Morana, the new finance director of Boohoo, said the group had heavily cut investment in brands including Warehouse, Oasis, Wallis and Dorothy Perkins, which are now being sold through Debenhams rather their own websites. Boohoo wrote off £22.4m relating to the value of those brands, some of which were bought for £25m out of the collapse of Philip Green’s Arcadia Group in 2021.
Morana said there was more competition from traditional retailers expanding online and the likes of Shein.
But he added: “The business has faced into tough trading conditions and dealt with it as best it could and now hopefully there are some green shoots out there and a bit of consumer confidence is coming back.”
He said the group had a “robust balance sheet”, with £130m of property and a stake in Revolution Beauty, and trading had improved in the second half of the year with sales of core brands – Boohoo, Debenhams, Karen Millen and Pretty Little Thing – down just 4%. “We see investment to take us to growth over the next 12 months,” Morana said.
Boohoo’s share price fell and then recovered on Wednesday but is less than a tenth of its value three years ago, when it was riding high on a shift to online shopping during the coronavirus pandemic while high streets were affected by government lockdowns.
The poor performance meant the company did not give 16m shares to shareholders of Pretty Little Thing, who are led by Umar Kaman, a son of the Boohoo co-founder and chair, Mahmud Kamani.
The 16.1m share payment, promised under a 2020 deal, was only due if Boohoo’s share price hit 491p by March this year. If they had hit that level, Umar Kamani and his fellow Pretty Little Thing investors would have received about £79m in stock this year, just before his four-day wedding last weekend on the French Riviera involving performances from Andrea Bocelli and Mariah Carey.
The company said: “While trading conditions have remained challenging due to cost inflation, uncertain consumer demand and normalisation of the channel shift online, the group has a strong business model and clear strategy which it is focused on executing to unlock market share.”
Boohoo and other online sellers enjoyed a boom in demand during the pandemic, when many households turned to the internet to buy comfy clothing to work and rest at home while many high streets were shut down.
With high streets reopened, and new competition from cut-price Chinese sellers Shein and Temu as well as secondhand marketplaces such as Vinted and Depop, once successful online fashion specialists have taken a hit.
Lyttle said: “The group is now well positioned to return to growth, and we are focused on ensuring that growth is both sustainable and profitable.”
Guy Lawson-Johns, an equity analyst at Hargreaves Lansdown, said: “Boohoo’s full-year results were a painful read for investors. Revenue declined at high double-digit rates across all regions, including 18% in the US, which is seen as the group’s pathway to major growth.
“For now, it remains a struggling company with a tarnished reputation, reflected in the group’s valuation, which has come down significantly over the last few years.”
