Boohoo Group PLC (AIM:BOO) shares tumbled almost 10% in early trade this morning after the online fashion retailer revealed it slipped into the red in the first half as revenue fell sharply, and warned of further falls in sales and profits for the full year.
Revenue of £729.1 million for the six months ended 31 August 2023 was down 17% on a year earlier, which resulted in an adjusted pre-tax loss of £9.1 million compared to a pre-tax profit of £6.2 million last time.
UK sales slid 19% and international sales fell 15%, although Boohoo said revenue in core brands declined 10%, which was consistent with prior guidance of a 10-15% fall.
Guidance cut
The group said it had targeted more profitable sales in its labels which resulted in more significant revenue declines.
Given the slower-than-anticipated volume recovery and the continued targeting of more profitable sales within its labels, revenues for the year ending 28 February 2024 are now expected to decline by 12% to 17%.
This compares to the group's initial projection of revenues coming in somewhere between flat to down 5%.
Adjusted EBITDA margins are expected to be between 4% and 4.5%, in line with prior guidance, with adjusted EBITDA expected to be between £58 million to £70 million.
Gross margin strengthened in the first half, despite significant investments into reducing lead times in the supply chain and into price reductions for the customer.
Boohoo has also identified more than £125 million of annualised cost savings to be delivered across 2024 and 2025, supporting a disciplined reinvestment programme.
Stock levels fell 35% year on year, it added, due to a more streamlined approach to inventory.
Unimpressed reaction, but analysts see positives
The shares fell 9.75% to 28.5p in the first half hour of trading, though recovered slightly to 29p, where they are still down 21.5% since the start of the year.
Analysts at broker Peel Hunt said the softer revenue guidance was "as expected".
The new implied full-year adjusted EBITDA of £58-70 million compared to the current City consensus forecast of £68 million.
"Positives include stock reductions of 35 and net debt of £35m, which was better than expected, plus the successful launch of the US warehouse," they said, but expect the shares "to take a hit today, as consensus forecasts come down in the face of lower sales momentum".
Barclays also noted positives: "Boohoo has demonstrated its ability to deliver on profitability guidance, despite weaker top-line.
"However, the clear negative is the weakness in the market and their market share loss - the latter of which is a particular focus for investors regarding future growth and profitability potential."