Skip to content

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Boohoo shares slide on weak outlook

The online retailer has cut its earnings guidance for the full-year

Source: Bloomberg

Shares in Boohoo fell by 8% to 33p on Wednesday after the company posted a £15 million loss for the half-year, compared to a £24.6 million profit last year, and falling revenues.

At £882.4 million, the online fashion retailer’s interim sales were up 56% on 2019 figures (£564.9 million) but down 10% compared to the same period last year (£975.9 million). Meanwhile, gross margins dipped by 210 basis points to 52.5% year-on-year.

The company said that at 4%, returns were higher than during the period than during the pandemic, while sales were hit by a perfect storm of softer consumer demand, higher freight and logistics costs and higher cost inflation, as well as “strategic investments” made across the company.

UK sales were up by 12% before returns, however, and Boohoo’s management says it was encouraged by the momentum of its recently acquired brands, including Debenhams’ digital store. UK revenue growth over the past three year stands at 73%.
Sales declined by 29% in the US, hampered by increased delivery times, and by 2% in Europe. However, the company says that its new customs warehouses should help improve overseas sales margins and US sales are up by 60% over the last three years.

Inflationary cost pressures bite at Boohoo

Group chief executive officer John Lyttle told investors that over the past three years, Boohoo had enjoyed “significant gains in market share” across its brand portfolio, especially in the UK where he says its “price, product and proposition resonate strongly with customers.” However, he acknowledged that “performance in the first half was impacted by a more challenging economic backdrop weighing on consumer demand.”

“We have a clear plan in place to improve future profitability and financial performance through self-help via the delivery of key projects, which will stand us in good stead as macro-economic headwinds ease,” he added. “We remain confident in the long-term outlook, as we continue to offer customers unrivalled choice, inclusive ranges and great value pricing, giving them even more reasons to shop with us.”

Challenging outlook for the online fashion retailer

However, Boohoo also warned investors that it was cutting revenue guidance for the full-year as a result of the “macro-economic and consumer backdrop” and the effect it had had on the company’s first-half revenues. Management expects revenue declines to continue into the second-half and, as such, has reduced its earnings forecasts from adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) margins of 4% and 7% to “3% and 5%”.

Sherri Malek, analyst at broker RBC, told the FT that the new earnings forecasts suggested a downgrade of about 25 per cent for full-year underlying earnings and that estimates beyond 2022 could also be negatively affected.

At 37p, the shares have collapsed by 83% this year. While they may look oversold, with inflationary pressures continuing, it may be a while before any share price recovery takes place.

Take your position on 17,000+ shares with the UK’s No.1 platform.* Learn more about trading or investing in shares with us, or open an account to get started today.
* Best trading platform as awarded at the ADVFN International Financial Awards 2022

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access
Learn more

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

You might be interested in…

<h3>How much does trading cost?</h3>
<h3>Find out about IG</h3>
<h3>Plan your trading</h3>

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.