Boohoo shares fall out of fashion as sales disappoint

Fast fashion online retailers have experienced well-documented struggles with sales since the pandemic, and Boohoo is no exception.

Revenue for the 2024 full year plummeted 17%. The company has blamed macroeconomic conditions, but the problems may run much deeper than external economic factors. 

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“Boohoo’s full-year results were a painful read for investors. Revenue declined at high double-digit rates across all regions, including an 18% in the US, which is seen as the group’s pathway to major growth,” said Guy Lawson-Johns, equity analyst, Hargreaves Lansdown.

Boohoo shares were down 3.9% at 33.8p at the time of writing. Shares in the group traded above 400p in the midst of the pandemic when online shopping boomed.

Boohoo has structural problems to address. Consumers of the fast-fashion brands housed within Boohoo are constantly chasing the latest trends. What was popular during Boohoo’s meteoric rise may not be as popular now.

Those who had an affinity with a brand in their 20s may not have the same affinity in their 30s. If these loyal customers diminish and aren’t replaced, it will act as a major headwind for sales.

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There is also the impact of new entrants, such as Shein, stealing away market share, explains Yanmei Tang, Analyst at Third Bridge.

“Shein has been a clear threat, capturing market share from Boohoo. Our experts note that Shein’s affordability and successful TikTok campaigns make them more appealing to young customers.”

In addition, Boohoo has been embroiled in a series of scandals and investigations revealing unethical manufacturing practices. This will have done nothing to boost their appeal to young fashion consumers. 

The company said it had seen ’positive’ trends developing in its core brands from H12024 to H22024 when sales declines slowed from 9% to 4%. It is an improvement but only in the respect that sales performance has improved from being disastrous to worrying. 

The big concern for investors will be the widening loss. Loss before tax expanded to £159.9m in 2024FY from £90.7m in 2023FY. 

In the year ahead, Boohoo promises £125m in costs savings and wants to see general merchandise value sales grow. 

If Boohoo doesn’t stop the rot in 2025FY and produce top-line growth after a series of dismal years, one will really worry about shareholder value creation over the long term.

“Investors want Boohoo to make profit, but raising prices due to inflation while customers face financial strain puts them in a tough spot. Offering affordable basics is good, but they risk losing out on successful fashion products,” Yanmei Tang said.

“Consumers have shifted away from Boohoo’s core going out and bodycon styles. Fashion trends have moved towards more casual and basics, which will continue to drive negative sales growth for Boohoo near term.

“Boohoo’s limited product range lacks diversity in brands and adjacencies, such as sportswear, which typically drive incremental sales for multi-brand retailers.”

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