Boohoo’s Bumpy Ride: How the Online Fashion Giant Is Fighting Back

Last Updated: June 10, 2024By

Boohoo’s Tough Times: Job Cuts, Debt, and Competition

Boohoo, the online fashion giant, has recently cut over 1,000 jobs and found itself deep in debt. This comes after the company’s losses skyrocketed and sales dipped by 13%. The competition from Chinese online retailer Shein and the revival of brick-and-mortar stores after the pandemic lockdowns have hit Boohoo hard.

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Boohoo, which owns well-known brands like Debenhams, Warehouse, Dorothy Perkins, and Pretty Little Thing, reported a net debt of £95 million by the end of February. Just a year ago, the company had nearly £6 million in net cash. Their losses widened by 76% to £160 million, and sales dropped to £1.8 billion.

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John Lyttle, Boohoo’s CEO, blamed the company’s struggles on “difficult market conditions,” including high inflation and weakened consumer demand. To combat these challenges, Boohoo plans to save £125 million in the coming year by automating their Sheffield warehouse, closing one in Daventry, and opening a new warehouse in the US.

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Boohoo, founded in Manchester in 2006, has seen a significant drop in active customers—an 11% decrease, to be exact. Customers are not only spending less but also visiting the site less frequently. The company had to cut more than 1,000 jobs last year to cope with these challenges.

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Stephen Morana, Boohoo’s new finance director, stated that the company has slashed investments in brands like Warehouse, Oasis, Wallis, and Dorothy Perkins. These brands are now being sold through Debenhams rather than their own websites. Boohoo wrote off £22.4 million related to the value of these brands, some of which were acquired for £25 million from Philip Green’s Arcadia Group in 2021.

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Facing Fierce Competition

Morana also mentioned that Boohoo faces more competition from traditional retailers expanding online and from Shein. Despite these hurdles, Morana believes the company is handling the tough market conditions as best as it can and hopes to see a resurgence in consumer confidence soon.

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Boohoo’s balance sheet remains “robust” with £130 million in property assets and a stake in Revolution Beauty. The company saw improved trading in the latter half of the year, with sales of core brands like Boohoo, Debenhams, Karen Millen, and Pretty Little Thing only down by 4%. Morana is optimistic about future growth, saying, “We see investment to take us to growth over the next 12 months.”

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The Share Price Rollercoaster

Boohoo’s share price took a hit but eventually bounced back on Wednesday. However, it is still worth less than a tenth of its value three years ago when the pandemic had shifted consumer shopping habits online, benefiting Boohoo.

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Because of the poor performance, Boohoo did not distribute 16 million shares to Pretty Little Thing shareholders, led by Umar Kamani, the son of Boohoo’s co-founder and chair, Mahmud Kamani. The share payment was contingent on Boohoo’s share price hitting 491p by March this year. Had it reached that level, Umar Kamani and other investors would have received about £79 million in stock, just before Kamani’s extravagant four-day wedding on the French Riviera.

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Looking Ahead

Boohoo acknowledged the tough trading conditions, citing cost inflation, uncertain consumer demand, and the normalization of online shopping post-pandemic. Nevertheless, the company believes it has a solid business model and clear strategy to regain market share.

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During the pandemic, Boohoo and other online retailers thrived as people turned to the internet for comfortable work-from-home clothing. However, the reopening of high streets and new competition from budget Chinese retailers like Shein and Temu, along with secondhand marketplaces like Vinted and Depop, have challenged online fashion specialists like Boohoo.

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Despite the tough times, Lyttle remains optimistic. “The group is now well positioned to return to growth, and we are focused on ensuring that growth is both sustainable and profitable,” he said.

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Investor Concerns

Guy Lawson-Johns, an equity analyst at Hargreaves Lansdown, described Boohoo’s full-year results as a “painful read for investors.” Revenue declined at double-digit rates across all regions, including an 18% drop in the US, which was expected to be a significant growth market for Boohoo.

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“For now, Boohoo remains a struggling company with a tarnished reputation, reflected in its significantly reduced valuation over the last few years,” Lawson-Johns said.

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Boohoo’s Bumpy Ride: How the Online Fashion Giant Is Fighting Back

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