Boohoo Group saw gross demand growth in its third quarter, compared to the first, second, and second quarters. However, the company stated that it expects lower expectations for the financial years ending February 28, 2022 than was previously predicted.
John Lyttle, Boohoo Group CEO commented on the third quarter trading results and outlook. He stated: “The strong performance we saw in the UK core market across both our acquired and established brands shows the potential to capture market share in key markets. Our international performance continues to be affected by the ongoing disruption in service due to the pandemic. This, along with increased consumer uncertainty, has also weighed heavily on our business.”
Boohoo reduces outlook
Now, the group expects net sales to grow by 12 percent to 14 percent as opposed to its previous guidance of 20% to 25 percent growth.
The adjusted EBITDA margin is expected to range from 6 percent to 7 percentage, as opposed to the previous guidance of 9 to 9.5 percent. This would mean that adjusted EBITDA could be between 117 million and 139 million pounds.
The company explained that this is due to substantially higher returns rates that impact net sales growth and cost, as well as continued extended delivery times that impact international demand. This results in lower returns on marketing and significant inbound freight cost inflation.
Boohoo reports Q3 net sales growth by 10 percent
Gross sales increased by 28 percent over the three-month period, while net sales rose 10 percent to 506.2 millions pounds.
Gross sales in the UK rose by 58 percent over FY21, 102 percent over FY22, and net sales increased 32 percent from FY21 to 320.3 million pounds.
The pandemic caused a significant impact on international performance in all markets and brands of the group. All international sales are currently handled by the UK distribution network. Although September saw strong signs of recovery, Europe’s revenue declined in the last months of the period due to increased consumer uncertainty.
Due to the continuing impact of lower air freight capacity on customer delivery times, performance in the US has not experienced the recovery that was anticipated.
Further, the company stated that gross margin was down 100bps in the past year due to an ongoing and significant pandemic of inbound freight cost inflation. The company estimates that this will impact EBITDA by around 20 million pounds in fiscal year. Most of it is in the second-half.
To support its international growth ambitions, the group continues to invest in its infrastructure. This includes plans for its US distribution center. The group remains confident in its medium-term margin guidance of 10 percent adjusted EBITDA margin.