Rising inflation and the cost-of-living crisis took their toll on Manchester online fashion retailer, boohoo, which reported lower revenues and deeper losses for the year to February 29, 2024, today.
Turnover was down by 17% to £1.461bn, gross merchandise value (GMV) fell by 13% to £1.808bn, and pre-tax losses increased from £90.7m in 2023 to £159.9m, a rise of 69.2%.
The business also finished the year with a £95m deficit in net cash, compared with a £5.9m surplus the previous year, due to capital expenditure.
During the year the group had invested £64.8m in the automation of its Sheffield distribution hub, and growth in its US division.
The group pointed to a positive trend in the performance of its core brands – boohoo, boohooMAN, PrettyLittleThing, Karen Millen, Debenhams External Marketplace – with GMV decline slowing from nine per cent in the first half to four per cent in the second half, showing a clear improvement in trajectory, it said.
Operating costs fell 16% to £699m, driven by the actions taken under the group’s ongoing cost savings programme.
Boohoo said it has a robust balance sheet with £123.7m of land and buildings, £200.3m of fixtures and fittings, £208m of inventory and £29.9m investment in the Revolution Beauty business.
During the 2023 financial year the group secured a new £325m rolling capital facility, increasing from the previous £100m facility. The facility remains fully drawn at the end of February 2024.
Boohoo said the UK market continues to be the largest for the group, accounting for 63% of revenue (2023: 62%). Revenue was £921.5m declining by 16% on 2023 reflecting the impact of the macro environment on consumer demand, as well as price investments and the increase of the Debenhams Marketplace within the sales mix. Gross margin improved from 47.9% to 50.0% and return rates have reduced slightly, which is attributable to product mix, the capturing of deflation in the supply chain and pass-through of lower prices to our consumers.
USA revenues declined 18% on the prior year. Delivery times to the USA for most of the period remained elevated compared with pre-pandemic levels, and this has impacted demand. Successful go-live of the group’s US distribution centre on time and on budget in August has transformed the delivery proposition for US customers, and there will be a phased roll-out of brands operating in the facility over time. Return rates have decreased year on year reflecting brand mix. Gross margin reduced from 58% to 55.9% reflecting brand mix as well as the impact of duties associated with the new distribution centre.
Revenue in the rest of Europe decreased by 20% year on year to £165.8m (2023: £206.5m), with performance impacted by annualisation against strong wholesale comparatives. Gross margin improved slightly from 52% to 52.7% and return rates decreased year on year.
Revenue in the rest of the world decreased by 30% on the prior year to £74.6m (2023: £107m). Gross margin improved from 50.7% to 54.8% with return rates decreased year on year.
During the 2024 financial year boohoo said it took significant steps to reposition the group for sustainable, profitable growth.
It is targeting GMV growth, as well as continued improvements in adjusted EBITDA margin. It said it remains confident in its 6-8% medium term EBITDA margin target.
In the current financial year, 2025, it will continue to leverage the increasing efficiencies generated by its investment in automation and capacity with an ongoing focus on cost reduction. It remains on track to deliver annualised cost savings of £125m across cost of goods, supply chain and overheads in FY25.
Also, a significant capital expenditure reduction is expected in FY25 with the investment cycle now complete. The group expects to generate positive free cash flow in FY25.
John Lyttle
CEO, John Lyttle, said: “We have a highly loyal customer base and throughout the year we remained focused on maintaining our position as an industry leading, fashion-forward group with brands that deliver on-trend, high quality fashion at great value prices. The strength and diversity across our core brands means the group is well placed to serve a global customer base across fashion, beauty and home.
“Despite difficult market conditions, caused by high levels of inflation and weakened consumer demand, we made continued progress in the year. I am particularly encouraged with the ongoing trend of improved performance in our core brands which saw GMV down nine per cent in H124 and down just four per cent in H224 demonstrating increasing momentum and validating our strategy to focus on these brands which are much loved by our customer base.”
He added: “We continue to take actions to deliver on our goal of bringing the entire group back to profitable growth. In FY24, we completed our investment cycle with the launch of our US distribution centre and the successful delivery of our Sheffield Automation project.
“Sheffield is already delivering significant efficiency improvements, which, together with the traction of Debenhams marketplace, is generating margin improvement across the group. We have also taken steps to transition several of our labels over onto Debenhams marketplace to drive enhanced profitability.
“This proved effective during the year and is something that will drive additional profitability going forward. These factors, combined with improving market conditions, give us strong confidence in our medium term outlook.
“The group is now well positioned to return to growth, and we are focused on ensuring that growth is both sustainable and profitable.”