Boohoo sees light at the end of the tunnel but revenue still pressured

By Geoffrey Smith 

Investing.com -- Boohoo's (LON:BOOH) struggle with the shift back to in-store shopping continued through the back end of 2023, but the battered fast fashion company claimed to see a light at the end of the tunnel in 2023 as cost inflation eases.

The U.K.-based group said that nothing had happened over the holiday period to change its forecasts for its current fiscal year, which ends in February. It still expects revenue to drop around 12%, while its underlying operating margin is set to drop to around 3.5% before interest, taxes, depreciation and amortization. That's toward the low end of its guidance range of 3%-5%. 

Chief executive John Lyttle said the outlook for the year ahead is still "uncertain due to macro-economic factors," but said that falling freight rates and other savings across the group's operations should help profitability as the year progresses.  

Like many pure-play online retailers, Boohoo had been caught out by the re-opening of the economy after the pandemic, which left it with a pile of unsold inventory that had to be shifted at discounted levels. It had originally expected revenue to grow by a "low single-digit" percentage in FY23. 

As of December, Lyttle said, inventory had been reduced by 27% from a year earlier.

"With this focus on careful inventory management, strong cost control and cash management, we will continue to drive operational and cost efficiency across the business," Lyttle said. 

In the four months through December, the key season for the group, revenue was down 13% at constant exchange rates at £637.7 million (£1 = $1.2315), with U.S. sales in particular down 17%. Revenue is still up 35% from the 2020 fiscal year, which ended just as the pandemic arrived in its core U.K. and European markets. 

Analysts at RBC said the revenue figure was slightly below consensus and hinted at further pressure on the EBITDA margin in future.