Boohoo, the popular online fashion retailer known for its fast fashion offerings, has reported a decrease in sales for the first time ever. In the three months leading up to May 31st, the company’s total sales reached £445.7 million, representing an 8% decrease compared to the previous year. However, despite this decline, Boohoo still saw a significant 75% increase in sales compared to the same quarter before the pandemic.

Within the UK, sales for the latest quarter fell by 1% to £272.1 million. Although this was a decline, it was still a notable 94% increase when compared to the pre-pandemic period. Similarly, in the rest of Europe, revenue fell by 9% to £49.6 million, but experienced a strong 30% increase compared to the pre-Covid quarter.

Boohoo’s revenue in the US saw a significant drop of 28% to £95 million. However, it was still an impressive 85% rise compared to the pre-pandemic three months. In the rest of the world, revenue increased by 15% to £29 million, representing a 20% growth when compared to the pre-Covid quarter.

Boohoo explained that the comparisons with the previous year appeared weaker due to the lockdowns which resulted in high sales during the year-ago period. However, the company emphasized a three-year comparison, which showed overall strong growth.

The company acknowledged that the ongoing normalization of returns due to changes in product mix had impacted net sales, despite positive gross demand growth. This echoes the sentiments expressed by its online rival, ASOS, which also cited high rates of returns as a factor in their recent profit warning.

Despite these challenges, Boohoo reported month-on-month improvement in UK sales during the period, with net sales growth returning in May. The company attributed this to the resonance of its leading proposition with customers. However, its international performance continued to be affected by increased delivery times.

In terms of profitability, Boohoo reported a gross margin of 52.8% for the quarter, a decrease of 220 basis points compared to the strong prior year. However, it represented a 240 basis point increase compared to the second half of the previous financial year, indicating improvement throughout the quarter.

Boohoo highlighted its efforts in optimizing operations and positioning itself for a strong rebound once pandemic-related challenges ease. These actions included increasing sourcing from near-shore markets to reduce exposure to elevated inbound freight costs, controlling inventory levels, and improving supply chain flexibility. The company also provided updates on key strategic projects, such as the automation project in Sheffield and the lease of a new distribution center in Pennsylvania.

Despite the decline in sales for the first quarter, Boohoo remains optimistic about its future prospects and aims to rebound strongly as pandemic-related challenges subside. The company has maintained its outlook for the financial year ending February 28, 2023, expecting revenue growth in the low single-digits and a return to growth in Q2. Adjusted EBITDA margins are projected to be between 4% and 7%.

Boohoo’s CEO, John Lyttle, expressed satisfaction with the progress being made towards the company’s strategic priorities. He noted promising signs from the group’s sales performance in the UK and looked ahead to the key summer trading season as holidays ramp up and customers seek the latest fashion trends.

Overall, while Boohoo experienced a decline in sales for the first time, the company remains optimistic about its future prospects and aims to rebound strongly as pandemic-related challenges subside.

Links:
CNBC: Boohoo expects stronger growth in back half of year after Q1 falls
The Guardian: Boohoo reports first-quarter sales drop but UK and EU above pre-pandemic levels