Boohoo has warned that sales will fall by more than expected this year as shoppers buy fewer items than hoped for amid heavy competition from the Chinese rival Shein and the revival of high street shopping.
The online fast fashion specialist said it expected annual sales to fall by between 12% and 17%, a dive from the maximum 5% drop previously forecast, as analysts said the group had lost market share despite price cuts.
Boohoo’s sales are shrinking after a boom during the coronavirus pandemic, when stores on high streets and in shopping centres were forced to close for many months.
Sales fell 17% to £729m in the six months to 31 August, forcing the company £11m further into the red than a year before – to a loss of £26.4m.
It said sales of its core brands Boohoo, Pretty Little Thing, Karen Millen and Debenhams had fallen by 10%, in line with the wider online fashion market, while sales at its new labels, including Oasis, Warehouse, Dorothy Perkins and Burton, were even weaker.
Shoppers have returned to the high street to try on outfits after the pandemic drove them online, while the cost of living crisis has made them think twice about the delivery and returns charges associated with online shopping.
The cost of handling deliveries and returns has risen sharply amid worker shortages and increases in the minimum wage, prompting Boohoo to introduce a £1.99 charge to return items last summer.
The company is also facing heavy competition from Shein, which uses social media to push cheap garments, as well as sites such as Vinted and Depop that have popularised secondhand clothing.
Louise Déglise-Favre, an apparel analyst at the industry analysts GlobalData, said: “[Boohoo’s] struggles are largely due to the meteoric rise of Shein, which has jumped to the top of the ultra-fast fashion game and continues to steal market share. Shein is more agile than Boohoo and offers unbeatable low prices while keeping up with the endless stream of new micro-trends appearing on social media. Paradoxically, the group has also suffered from growing criticism from some consumers against fast fashion, decrying its environmental and social impacts.”
Boohoo said it expected to make underlying profits of between £58m and £70m in the year ahead, suggesting a potential fall from analysts’ hopes of £68m. The company said it was focusing on more profitable sales and cutting costs by £125m.
The group is also hoping to revive its business in the US after the opening of a US distribution centre that will speed up deliveries to homes to about three days from more than 10.
John Lyttle, the Boohoo chief executive, said: “Our confidence in the medium-term prospects for the group remains unchanged as we execute on our key priorities where we see a clear path to improved profitability and getting back to growth.”
