Boohoo Group’s Shares Drop as Fast-Fashion Retail Industry Faces Challenges

Boohoo Group saw its shares fall Tuesday (Oct. 3) as it revised its earnings and revenue forecasts.

The U.K.-based fast-fashion retailer’s strategy of lowering prices to attract cash-strapped shoppers has resulted in a decline in revenue, Bloomberg reported Tuesday.

Boohoo Group revised its full-year sales forecast Tuesday, anticipating a drop of 12% to 17%, the company said in a press release.

“Our confidence in the medium-term prospects for the Group remains unchanged as we execute on our key priorities where we see a clear path to improved profitability and getting back to growth,” Group CEO John Lyttle said in the release.

To remain competitive in the U.K. clothing market, where inflation has reached 8%, Boohoo has implemented a strategy of reducing prices, according to the Bloomberg report. However, this approach has led to a 19% decline in revenue in the U.K., which accounts for the majority of the company’s sales. On a positive note, the gross margin in the U.K. has slightly improved due to reduced supply chain costs and lower return rates.

In addition, Boohoo has been actively working on enhancing its U.S. business, which has faced challenges related to timely parcel delivery, the report said. The company has opened a distribution center in Pennsylvania, enabling next-day and express delivery options to 95% of the U.S. within three days.

Analysts have weighed in on Boohoo’s revised sales growth guidance, noting that the company is prioritizing profit and cash flow over sales growth, per the report. Boohoo’s inventory decline and improved adjusted EBITDA are positive developments for the company’s cash generation. To boost profitability, Boohoo is focused on achieving annual cost savings of 125 million pounds (about $151 million).

The challenges faced by Boohoo are not unique, as the entire clothing retail industry is grappling with challenges such as inflation and a drop in online spending following the eCommerce boom during COVID lockdowns, according to the report.

One of the factors affecting Boohoo’s financial performance is the rise in freight and energy costs, although the company has expressed optimism that these costs are starting to ease, the report said. Additionally, competition in the clothing market has intensified as shoppers return to physical stores.

Fast-fashion eCommerce marketplaces Wish, Shein and Temu have revised critical operational elements to reignite momentum, PYMNTS reported in February. Like Boohoo, they have done so in response to the pressures of inflation and shifts in consumer buying behavior.

For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.