Shares in Boohoo jumped by as much as 12 per cent on Tuesday as the online fast-fashion retailer reassured investors over its growth prospects after slumping to an annual loss.
The UK group’s revenue fell by 11 per cent to £1.7bn in the 12 months to February 28 after shoppers were hit by the cost of living crisis and many returned to physical stores post-pandemic.
Boohoo, which also owns the Karen Millen and Debenhams brands, swung to a pre-tax loss of £91mn compared with a profit of £7.8mn the previous year, but chief executive John Lyttle insisted the group would stem the decline in sales and losses this year.
It is now targeting a 6 per cent to 8 per cent adjusted underlying profit margin in the medium term, up from the forecast 4 per cent to 4.5 per cent for 2023-24 and 3.6 per cent last year.
The retailer, which benefited from the boom in online shopping during the Covid-19 pandemic, has been cutting costs, including reducing the level of stock it holds by more than a third over the past year, to help revive its fortunes.
“The group’s focus for the year ahead is rebuilding profitability and going back to growth,” finance chief Shaun McCabe told investors and analysts.
A significant part of its ambitions is centred on its US expansion, where it will open a distribution centre this year, slashing delivery times from eight to 10 days, to three days. “It’s a game-changer,” Lyttle told analysts.
Shares in Boohoo were up 6 per cent in afternoon trading, cutting their decline over the past year to 48 per cent. The “main surprise is the balance sheet”, according to analysts at Peel Hunt, with net cash of £5.9mn versus their net debt forecast of £55mn, and consensus closer to £70mn.
Analysts at Davy added: “The emergence from the pandemic has been hard for the online retailers. Boohoo is no exception. The revenue line remains fragile, but adjusted ebitda, inventory and cash flow have been well managed. The strategic intent is clear, execution remains challenging, but our preference for Boohoo over Asos remains.”
Both Asos and Boohoo have been hit by surging inflation as shoppers cut back on fashion. Asos last week said it had more than £400mn in cash and undrawn facilities as of February, saying its balance sheet was “robust and flexible”.
