Boohoo sees another revenue fall, but stays upbeat
Boohoo’s eagerly anticipated trading statement on Thursday revealed figures that were just about in line with expectations, although expectations weren't exactly high. Revenue at the Boohoo, Debenhams, PrettyLittleThing and Karen Millen owner was up sharply compared to pre-pandemic, but down in all regions compared to a year ago for the four months to the end of December.
There were a few crumbs of good news aside from the negative figures, with CEO John Lyttle highlighting the “progress made” that gives the company “confidence that as macro-economic headwinds ease it will be well-positioned to rebound strongly”.
He said the latest performance reflected the “normalisation of the channel shift online over the last 12 months, but demonstrates the significant market share gains the group has made over the last three years”. And while “the demand outlook is uncertain due to macro-economic factors, cost inflation is expected to begin to moderate in the second half of the year”.
He added: “We have reduced inventory by 27% year on year and with this focus on careful inventory management, strong cost control and cash management, we will continue to drive operational and cost efficiency across the business. The group has continued to invest in key strategic priorities that will enable future growth.”
So what about those figures and why did the company's already-battered share price fall further in early trading? It said total revenue in the latest four months of FY23 was £637.7 million down 11% compared to a year ago and down 13% at constant exchange rates (CER). But that was up 35% against three years ago.
It's a little frustrating that the company continued to focus on the headline and regional figures rather than individual brand performance. It said UK revenue fell 11% (but was 57% higher than three years ago) at £400.8 million. Revenue in the rest of Europe was down 8% (or 11% CER) at £73.5 million, which was 6% higher than pre-pandemic. In the US, revenue fell 12% (-17% CER) at £128.9 million. That was 17% higher than three years ago. And in the rest of the world revenue fell 9% (-15% CER) to £34.5 million and interestingly, was also down 9% against the pre-pandemic period.
The company attributed the UK revenue decline to a strong prior-year comparative, and an international revenue overall decline of 10% to extended delivery times compared to pre-pandemic levels that continued “to affect the proposition”.
The gross margin for the period of 49.7% was “broadly” in line with expectations, and is expected to improve year on year in period 4, “with a reduction in markdown activity anticipated compared to the same period last year”.
Inventory continues to be “tightly controlled, with improving speed and flexibility within our global supply base and inventory significantly reduced, down 27% year on year”.
The company also noted improvements in cash generation through tighter inventory management, cost control and an improved working capital cycle. And it said it has “significant liquidity headroom with more than £300 million of gross cash at the end of December, with net debt expected to be less than 1x Adjusted EBITDA at the end of the financial year”.
On the logistics front, it reported the “successful launch of automation in the group's distribution centre in Sheffield, UK, with improvements to efficiency ramping up over the coming months in line with expectations”. And “progress continues to be made with our US distribution centre, driving a step change in our customer proposition, expected to launch with a phased approach over 2023 and early 2024”.
FY23 is almost over (it ends on 28 February) and for the 12 months, the company said adjusted EBITDA is expected to be in line with market expectations. Revenues should be down around 12% over the financial year, with an adjusted EBITDA margin of approximately 3.5%.
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