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Boohoo – Higher Shipping Costs And Delivery Times Continue To Weigh On Performance

By Anna Peel. Originally published at ValueWalk.

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Boohoo Group PLC (LON:BOO)’s full year revenue rose 14% to £2.0bn, up 61% from 2020. Strong growth in the UK helped offset a small decline in international sales.

Higher shipping costs and increased marketing spend meant underlying cash profit (EBITDA) was down 28% to £125.1m, in line with guidance.

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Cost challenges are expected to continue into the new financial year. The group’s targeting revenue growth in the low-single digits and an underlying cash profit margin between 4%-7%.

The shares were down 5.5% following the announcement.

Boohoo’s Earnings

Matt Britzman, Equity Analyst at Hargreaves Lansdown:

“Markets reacted positively back in March when we heard revenue growth was on track for the downgraded guidance, profits have followed suit, but the outlook now looks murky at best. Cost and shipping challenges remain very much intact and there’s another tough year on the horizon with revenue and profit growth expected to be hard to come by.

There’s no doubt there’s demand for boohoo’s products, but persistent shipping challenges mean servicing that demand is becoming increasingly difficult, especially in overseas growth areas. US customers are still having to wait longer than they’d like to receive their orders, as supply chain issues linger on. Plans are afoot to build a distribution centre in the US which will help – but it’s costly and won’t provide an immediate solution. Fast fashion comes with customers willing to flit between brands. If they can’t get the latest trends quickly, US customers might move on permanently, adding a layer of risk to this project.

There’re also broader issues with high return rates and lower demand in some of the group’s core markets. With loungewear no longer filling up so many virtual baskets and the more fickle tastes of occasion wear back in demand returns have returned as a bugbear. Some of these headwinds should naturally ease, but certainly not overnight, in the short-term performance will continue to be held back.”


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