Boohoo has posted its first UK sales drop in the fast fashion retailer’s history, pointing to supply chain disruption and a struggle to be competitive with international players.
In a trading update on Thursday, the Manchester-based retailer posted a one per cent drop in UK revenue while overall sales plunged eight per cent in the three months to 31 May 2022.
Boohoo said it had been anticipating a slowdown of sales as consumers’ online shopping in lockdown fuelled previously strong comparatives.
It stuck to its outlook for the 2023 financial year, which is anticipated to be “low-single digits”, with a return to growth in the second quarter.
Boohoo’s share price crashed 10 per cent on Thursday morning when markets opened, with the retailer’s shares down more than 80 per cent in the past year.
It comes as rival Asos has warned that it expects its profit to be hit this year with more shoppers returning clothes, against a backdrop of sky-high inflation.
Harry Barnick, senior analyst at Third Bridge said: “Boohoo’s impressive growth has stalled, dampened by inflation and the rising cost of living as consumers begin to tighten their purse strings.”
“The sales challenges are compounded by sky-high freight rates and raw material cost inflation. Boohoo is now faced with the challenge of increasing prices in a promotionally driven and highly competitive market.”
While Boohoo had moved past the “very worst” of its supply chain scandal, when it was found to be paying workers in Leicester just £3.50, analysts said one challenge had been swapped for another.
“Very strong comparisons with last year make current trading look poor, as the world is no longer frantically ordering loungewear from the sofa, and when we do place an order, it’s a lot more likely to end up in the returns heap back at boohoo HQ,” Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said.