Online fashion firm Boohoo has warned that full-year sales could tumble by up to 17% as under-pressure shoppers cut back.
Shares in the group plunged 11% as it said that annual sales are expected to slump by between 12% and 17%, blaming a slower than expected recovery in sales by volume and moves to focus on more profitable sales within its labels as part of overhaul plans.
It had previously forecast sales to remain flat or fall by up to 5%.
Boohoo revealed that underlying earnings may now fall in the year to next February 28, lowering its guidance to between £58 million and £70 million.
The group posted underlying earnings of £63.3 million in 2022-23 and had previously guided for growth in 2023-24, to between £69 million to £78 million.
Boohoo is cutting prices to attract cash-strapped consumers during the cost-of-living crisis, while axing costs under an overhaul.
Chief executive John Lyttle insisted he still sees a “clear path” to getting back to profitability as the firm said its guidance for profit margins remained on track.
But half-year figures revealed pre-tax losses widening to £26.4 million in the six months to August 31 from £15.2 million a year ago.
On an underlying basis, it swung to a pre-tax loss of £9.1 million from profits of £6.2 million a year earlier.
Mr Lyttle said the group had made “substantial progress” on key projects and initiatives, including the launch of its US distribution centre and had earmarked over £125 million in annual cost cuts.
The firm had been looking to cut costs through focusing on efficiencies, including automating its warehouses and sourcing goods from Europe rather than Asia.
It is also lowering prices to “reinforce our value credentials”, according to Mr Lyttle.
“Our confidence in the medium-term prospects for the group remains unchanged as we execute on our key priorities where we see a clear path to improved profitability and getting back to growth,” he added.
But the overhaul comes amid a tough wider market, with shoppers cutting back as the cost of living rises.
Sales in the first half tumbled 17% to £729.1 million, with the UK faring worse than its international operations – down 19% against a 15% drop in the overseas business.
Boohoo said: “While trading conditions have remained challenging due to cost inflation, uncertain consumer demand and normalisation of the channel shift online, the group has a strong business model and clear strategy with which it is focused on executing to unlock market share.”
Richard Hunter, head of markets at interactive investor, said: “Boohoo is swimming against a strong tide… and recovery is not likely to become any easier.
“Online retail shopping has normalised to pre-pandemic levels as customers have returned to physical sites, while general inflationary and consumer confidence pressures remain in place.”
He said that while Boohoo is bullish about its turnaround progress, “the scale of the challenge in Boohoo’s rehabilitation remains significant”.
Published: by Radio NewsHub