Boohoo Group swings into £91m loss as sales drop but it expects performance to rebound

Boohoo Group swung into a £90.7m pre-tax loss in the year to 28 February 2023 on sales down 11% to £1.77 billion, however the online fashion giant said it expected a rebound in performance this year.

The group, which owns brands such as Boohoo, PrettyLittleThing, Karen Millen and Oasis, had been hit by higher returns and shoppers returning to physical retail in the wake of the pandemic.

However CEO John Lyttle said the group had made significant gains since 2020 when the pandemic hit with sales up 43% over the past three years, and UK sales up 61%. Active customer numbers had increased from 13 million to 18 million over the period.

To address declining profitability, the company had taken steps to reduce its inventory levels, which are down 36% year on year or £101m in absolute terms as at the end of February.

The group posted an adjusted EBITDA of £63.3 million for the period, down 49%, with adjusted EBITDA margin of 3.6%.

In the first half of the current financial year ending February 2024, revenues are expected to decline by 10% to 15% as a result of the action being taken to rebuild profitability (reducing stock and cutting overheads).

However in the second half of the year, the group expects to return to double-digit revenue growth with medium term adjusted EBITDA margin expectation of 6% to 8%. Growth for the year ending February 2024 is therefore expected to be between flat and up 5%.

"Over the last three years, the Group has achieved significant market share gains. Looking ahead, we are investing for the future growth of this business with automation, local fulfilment capacity in the US and building global brand awareness. We will deliver sustainable returns on these investments. We will continue to give our customers the latest trends, outstanding value and a great experience.

"Our confidence in the medium-term prospects for the group remain unchanged, and as we execute on our key priorities we see a clear path to improved profitability and getting back to double digit revenue growth.  Our boohoo family has continued to deliver for our customers and the business and I want to thank them for all of their hard work and dedication," said Lyttle.

The confidence in the second-half performance was evidenced by its share price, which jumped by 13% on early trading to 43.5p.

David Reynolds, equity analyst at Davy, reacted to the results, saying: “The emergence from the pandemic has been hard for the online retailers, Boohoo is no exception.

“The revenue line remains fragile, but adjusted EBITDA (earnings before interest, tax, depreciation and amortisation), inventory and cash flow have been well managed.

“The strategic intent is clear, execution remains challenging.”