3rd Oct 2023 09:06
(Alliance News) - boohoo Group PLC cut its revenue outlook on Tuesday but painted a promising picture of its future, seeing a "clear path" to revival of its fortunes.
boohoo shares fell 8.1% to 29.02 pence each in London on Tuesday morning.
For the six months ended August 31, revenue fell 17% to GBP729.1 million from GBP882.4 million a year prior. The fast fashion firm's pretax loss stretched to GBP26.4 million from GBP15.2 million.
boohoo said consumer demand was hurt by tough economic conditions.
Looking to the full-year, boohoo now predicts its revenue will decline between 12% and 17% from GBP1.77 billion achieved the year prior. This is due to the "slower volume recovery than previously anticipated" and the company plotting "more profitable sales within our labels". Its previous revenue forecast ranged from a flat outcome to a 5% decline.
boohoo's adjusted earnings before interest, tax, depreciation and amortisation margin is still expected to land between 4% and 4.5%. Its first-half adjusted Ebitda margin improved to 4.3% from 4.0% a year earlier.
boohoo added: "The board's confidence remains unchanged in rebuilding profitability over the medium term, generating a 6% to 8% adjusted Ebitda margin while getting back to growth through: continued investment in product, price and proposition, volume growth, international expansion, unlocking cost deflation; and cost control."
interactive investor analyst Richard Hunter said boohoo's comments were "defiantly optimistic".
"The group added that substantial progress had been made across key projects and initiatives over the first half, lending confidence to medium-term prospects. Even so, the scale of the challenge in boohoo’s rehabilitation remains significant, as evidenced by its share price performance and the accompanying valuation," Hunter said.
"Prospects for a recovery and the depressed share price may have tempted Frasers Group to recently up its stake to 9.1% from 7.8%, but for investors the outlook is potentially fraught with difficulty. The market consensus of the shares has nonetheless remained at a hold, suggesting some guarded support for a potential improvement in fortunes, despite a typically volatile and initially negative share price reaction to the update."
Investment bank Jefferies said boohoo has made "operational progress", even if it did not have the product demand to be able to flaunt those strides in its financial results.
"But we are encouraged by the group's operational and strategic progress that should support a clear recovery when the demand picture improves," Jefferies analysts said.
"Operationally, the group has recorded notable successes, including the go-live of the US distribution centre in August (on time and on budget) that has improved US lead times by an average of 3 days, the unlock of distribution efficiencies from the Sheffield DC automation, the identification of GBP125 million of gross cost savings by [financial 2025], and the active capture of deflation through its supply chain. The latter has enabled boohoo to reinvest in its price position."
By Eric Cunha, Alliance News news editor
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