Boohoo Group PLC (AIM:BOO) issued a profit warning today, with the company citing a larger number of returns as one of the key factors behind the slashing of its forecasts.
Smarter and more expensive clothes, such as dresses from brands like Karen Millen and Coast, are the ones being returned, a spokesperson for the firm told the BBC.
READ: Boohoo slashes forecasts as customer returns soar
But Boohoo is not the only online retailer suffering.
In The Style Group yesterday also blamed returns for a halving of its interim profits, with the problem said to particularly affect its inclusive size ranges, though those numbers were only up to the end of September.
Retail expert Nick Bubb argues that all that Boohoo and possibly In The Style are experiencing is a return to pre-pandemic shopping habits, particularly by women.
He believes that Boohoo’s womenswear sales “have been very skewed to dresses - a sign that women’s buying has returned to normal”.
Bubb added that return rates are always high for dresses, with the consumer knowing they can return the item if they do not like the design, colour, etc.
From the consumer's point of view, returning items in-store or online is relatively straightforward.
For the retailer, however, the costs involved vary greatly, especially for those online stores offering to shoulder most or all of the costs.
“Handling product returns via a physical shop is relatively easy if a bit disappointing for the retailer," argued AJ Bell investment director Russ Mould.
“For an online service working to relatively thin profit margins that are supported by high turnover of stock, low costs and seamless logistics, a product return is a much bigger nuisance, as Boohoo’s trading alert makes only too clear.”
The Omicron outbreak and the widespread cancelling of Christmas parties was the spark for the large number of returns experienced by Boohoo.
Whether this is an industry-wide problem or just an issue for particular companies is not clear.
The acid test will be when online clothing sector leaders Next PLC (LSE:NXT) and ASOS PLC (AIM:ASC) update and that is not scheduled to be until after Christmas when the economic/Covid backdrop might look completely different again.
ASOS shares were down over 5% after the Boohoo announcement, while Next investors were relatively sanguine, with the shares moving higher initially before finishing flat.