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Britain's Boohoo warns on profit for second time in four months

Britain's Boohoo warns on full-year outlook
Britain's Boohoo warns on full-year outlook   -   Copyright  Thomson Reuters 2021
By Reuters

By James Davey

LONDON -British online fashion retailer Boohoo on Thursday warned on annual profit for the second time in four months, blaming higher product return rates, disruption to international deliveries and COVID-19-related cost inflation.

It said the new Omicron coronavirus variant could pose further demand uncertainty and elevated returns rates particularly in January and February.

Shares in the Manchester, northern England, based group, which sells clothing, shoes, accessories and beauty products aimed at 16 to 40-year olds, were down 12.6% at 0824 GMT, extending 2021 losses to 65%.

Boohoo has been seeking to improve its image after negative publicity over supply chain failings but had warned on the full year outlook in September.

The group said it expected net sales growth in the year to Feb. 28 2022 to be 12% to 14%, compared to previous guidance of 20% to 25%.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margin for the year was expected to be 6% to 7%, compared to previous guidance of 9% to 9.5%, implying adjusted EBITDA of between 117-139 million pounds ($155.2-$184.4 million), down from 173.6 million pounds made in 2020-21.

“This is due to significantly higher returns rates impacting net sales growth and costs, with continued extended delivery times impacting international demand, consequently driving lower returns on marketing expenditure, and significant ongoing pandemic-related inbound freight cost inflation,” it said.

Return rates across the industry were low during pandemic lockdowns, but have increased as consumers sought more occasion wear as restrictions have eased.

Updating on trading for the three months to Nov. 30, Boohoo said gross demand had exceeded that achieved in each of the first and second quarters. Gross sales were up 28% and net sales were up 10%.

The group said its full year guidance reflected an expectation that the factors impacting its performance would persist for the remainder of the financial year.

Boohoo also flagged higher exceptional items for the year of around 33 million pounds, versus 22.5 million previously guided, primarily due to warehouse and new brand restructuring.

($1 = 0.7540 pounds)