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Boohoo cuts full-year guidance as supply chain issues raise costs

Published: 08:37 30 Sep 2021 BST

Boohoo Group PLC - Boohoo downgrades full-year guidance as supply chain issues raise costs

Boohoo Group PLC (AIM:BOO) downgraded its profit forecast for fiscal 2022 due to rising freight costs in its supply chain and wage inflation at its distribution centres.

The clothing retailer said it now expects adjusted EBITDA margins to be 9%-9.5%, down from the previous forecast of 9.5%-10%.

Underlying profits (adjusted EBITDA) were £85.1mln in the six months to 31 August 2021, a decline of 5% compared with the same period last year, while revenue grew by 20% to £975.9mln.

The group said its performance in the first half was impacted by a £26mln increase in Coronavirus (COVID-19) related distribution costs as well as UK returns rates returning to pre-pandemic levels and physical stores reopening.

Boohoo said it expects full-year sales growth of 20%-25%, implying an increase in sales of 20%-30% in the second half of the financial year as growth re-accelerates.

The group expects the COVID-19 factors impacting EBITDA this year to normalise over the medium term, while recent cost inflation is expected to reduce as the group invests in its own infrastructure. 

Capital expenditure totalled a record £172mln in the first half and the fashion retailer raised its capex guidance for the full year to £275mln from £250mln, as it continues to invest in technology, offices and infrastructure.

It is opening a new distribution centre in North America in 2023, which it expects to “significantly” strengthen its proposition.

Commenting on current trading, the group said consumer demand improved in August, principally in the UK but also in key overseas markets such as Ireland and France. This trend improved further in September, with gross sales growth increasing compared with the second quarter.

Boohoo said it remains confident of achieving its target of 25% sales growth and 10% adjusted EBITDA margin in the medium term.

Chief executive John Lyttle said: “Entering the second half of the year, the group is well-positioned to accelerate its growth and our confidence in the group's medium-term targets remain unchanged. We will continue to invest across our platform, people and technology as we look to further cement our position as a leader in global fashion ecommerce."

At the end of August, Boohoo had net cash of £98mln, compared with £345mln a year earlier. Net cash outflow was £128mln, after capital expenditure of £172mln.

Shares in Boohoo were nearly 10% lower at 230.50p at midday.

Analysts at Peel Hunt were upbeat on the prospects for the fashion retailer, noting the pick-up in trading in the second half and the “exciting” medium-term outlook.

(Updating with broker comment and share price)

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