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Boohoo Falls Into Debt and Loses £160 Million Due to Slumping Sales

by Violet Dawson
0 comment

Boohoo’s fallen share price rose up this week but is still less than a tenth of its value three years ago

Recovery plans are in question for Boohoo, a British online fast fashion retailer. The firm claimed that it was on the path of recovery. But they also reported pre-tax losses of £159.9 million for the year to February 29, against £90.7 million the previous year. Their losses widened by 76% to £160 million and their sales crashed to £1.8 billion to nearly 20% as they made their way through the market conditions. 

The owner of Debenhams, Warehouse, Dorothy Perkins and Pretty Little Things, this online fashion specialist laid off more than 1000 people after their losses soared and sales slumped. They faced an 11% drop to £16 million in number of active customers and noticed that they often spent less and visited less. The fashion group faced and dealt with all of these issues amid heavy competition from Chinese online sellers and the revival of the high street after the pandemic.

ASOS was the COVID pandemic winner which shot up the online shopping spree. Boohoo has been trying to find grounds since then. Their supply chain issue was hurt, most products were returned, and competitions weakened the demand.   

John Lyttle, the chief executive of the fashion retailer group, blamed the uncertain market conditions. He said, “difficult market conditions, caused by high levels of inflation and weakened consumer demand”. The fashion group aims to make savings of £125 million in the year ahead as they plan to open a warehouse in the US, close one in Daventry, and put more automation into its Sheffield warehouse. 

According to the new finance director of Boohoo, Stephen Morana the business faced more competition from traditional retailers expanding online. He also stated that the fashion group had majorly cut down their investment in their brands including Warehouse, Oasis, Wallis and Dorothy Perkins. All of these at present are being sold through Debenhams rather than on their own websites. Boohoo wrote off the value of those brands, amounting to £22.4 million. Some of which were bought for £25 million out of the collapse of Phillip Green’s Arcadia Group in 2021.  

The business faced sturdy merchandising situations and overcame them in their best capacity possible and furthermore expect something on the brighter side in the future to bring back consumer confidence. 

The finance director Stephen also mentioned that the fashion group had a strong balance sheet with a stake in Revolution Beauty and properties worth £130 million. Boohoo sees investment as a step towards growth and stability over the next 12 months. 

Boohoo’s fallen share price rose up this week but is still less than a tenth of its value three years ago. At that time the group was soaring high on its online sales during the COVID pandemic while the high street brands were affected majorly. 

Due to their falling sales they could not pay £16.1 million to the shareholders of Pretty Little Things which is run by Umar Kamani, the son of the co-founder and chair of Boohoo. An agreement was made in 2020 promising the shareholder’s payment only if the fashion group’s share price hit 491p this year. Provided they had met the numbers, the investors would have received about £70 million in stock.  

The downfall of the share price as much as 6.3% to 33p this week, leaves the business to be valued at a little over £400 million. This amount is down by 10% than the one in the previous year and more than 90% since their peak in 2020. 

Analysts at Peel Hunt, an investment bank in London forecasts profits of £67 million which is down from its earlier forecast of £88 million and sales of just 1.8% compared to the prior estimation of 6.4%. 

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