(Alliance News) - Online fashion retailer boohoo on Thursday warned of rising costs, amid consumer demand that is still being held back by the virus pandemic and the return of competition from high street stores.
boohoo shares dropped 17% at the London market open following the announcement.
Boohoo said it delivered an "excellent operational and robust financial performance" during the first half of its financial year, which brought record levels of revenue but less profit.
For the six months to August 31, revenue was GBP975.9 million, up 20% from GBP816.5 million last year, but pretax profit fell to GBP24.6 million, down 64% from GBP68.1 million.
"Performance in the second quarter was impacted by UK returns rates returning to pre-pandemic levels, physical stores reopening, consumer uncertainty in markets that we operate in resulting in the loss of key events and holidays, as well as continued COVID-19 related disruption across the group's key international markets, which has impacted international delivery timeframes," boohoo explained.
Looking ahead, boohoo expects full-year sales growth of 20% to 25%, which implies second half sales growth of 20% to 30%.
However, annual adjusted earnings before interest, tax, depreciation, and amortisation margins are now expected to be 9% to 9.5%, lower than 9.5% to 10% as previously guided. This reflects ongoing investments across technology, offices and infrastructure, boohoo noted.
boohoo warned elevated short-term cost pressure experienced in the first half is expected to continue in the second half alongside recent freight cost inflation in the supply chain and wage inflation within its distribution centres.
"The pandemic is still adversely affecting consumer demand globally, both online and on the high street. We are pleased all our brands have continued to grow robustly across the two-year period, with growth being strongest in the UK and US, the rest of Europe being less strong and the rest of world declining slightly. The weaker international growth, the group believes, is driven by Covid-related factors, such as continued lockdowns and significantly extended delivery times," boohoo said.
Commented Harry Barnick, senior analyst at Third Bridge: "Our experts say supply chain concerns are now acute for companies like boohoo. Autumn/Winter clothing is typically sourced from outside of Europe and if Boohoo is unable to mitigate its supply chain issues, its successful test and repeat sales model could begin to unravel.
"Investors will be paying close attention to gross margin levels. Boohoo will either have to absorb additional supply chain costs or pass these on via price hikes."
Here is what you need to know at the London market open:
----------
MARKETS
----------
FTSE 100: up 0.3% at 7,131.75
----------
Hang Seng: down 0.6% at 24,527.22
Nikkei 225: closed down 0.3% at 29,452.66
DJIA: closed up 90.73 points, or 0.3%, at 34,390.72
S&P 500: closed up 0.2% at 4,359.46
Nasdaq Composite: closed down 0.2% at 14,512.44
----------
EUR: down at USD1.1601 (USD1.1618)
GBP: up at USD1.3450 (USD1.3434)
USD: flat at JPY111.90 (JPY111.85)
Gold: down at USD1,728.55 per ounce (USD1,732.75)
Oil (Brent): down at USD78.61 a barrel (USD79.09)
(changes since previous London equities close)
----------
ECONOMICS AND GENERAL
----------
Thursday's Key Economic Events still to come
0955 CEST Germany unemployment
1100 CEST EU unemployment
1400 CEST Germany consumer price index
0830 EDT US 3rd estimate gross domestic product
0830 EDT US jobless claims
1000 EDT US House Financial Services Committee hearing on Treasury and Fed Covid-19 response
1030 EDT US EIA weekly natural gas storage report
----------
The UK economy posted robust growth in the second quarter of 2021 following the easing of coronavirus restrictions, the Office for National Statistics said. In the three months to June, UK gross domestic product grew 24% year-on-year, reversing a 6.1% annual contraction in the first quarter. The latest reading beat market consensus, cited by FXStreet, of 22% economic growth. On a quarterly basis, UK GDP expanded 5.5% in the second quarter, which was revised up from a preliminary reading of 4.8%. The UK economy rebounded from a 1.4% quarterly contraction in the previous three-month period.
----------
UK house price growth slowed in August as the government's stamp duty holiday draws to a close, according to mortgage lender Nationwide. On an annual basis, the Nationwide UK house price index rose 10% in September, slowing from a rise of 11% in August. The September reading missed market consensus, cited by FXStreet, for a rise of 10.7%. Prices rose 0.1% in September month-on-month, slowing sharply from a 2.1% increase in August from July, and missed the forecast of 0.6%. The average price of a UK house was GBP248,742 in September, marginally lower from GBP248,857.
----------
An estate agents' body is calling for a review of the "outdated" levels at which home buyers start paying stamp duty in the UK as a tax break ends. Propertymark said the stamp duty holiday has been a success and its normal thresholds should now be reviewed. The "nil rate" stamp duty band in England and Northern Ireland was temporarily raised to GBP500,000 in July 2020, enabling buyers to save up to GBP15,000. This helped to boost the UK housing market which had nearly ground to a halt early in the coronavirus pandemic. From July 1 this year, the holiday was tapered to GBP250,000. From October 1, the stamp duty threshold will revert to its normal level of GBP125,000.
----------
BROKER RATING CHANGES
----------
KEPLER CHEUVREUX RAISES PEARSON TO 'HOLD' (REDUCE) - PRICE TARGET 750 (670) PENCE
----------
JEFFERIES RAISES FERGUSON PRICE TARGET TO 12,067 (11,560) PENCE - 'BUY'
----------
BERENBERG RAISES TRAINLINE PRICE TARGET TO 440 (350) PENCE - 'BUY'
----------
COMPANIES - FTSE 100
----------
Guinness brewer Diageo said it has made a strong start to financial 2022, with organic net sales momentum across all regions. The spirits and beer company said this reflected "excellent execution" as it benefited from resilience in off-trade and continued recovery in the on-trade. However, Diageo said it expects near-term volatility to remain, including the potential future waves of Covid-19. Diageo said its North American business was performing strongly, despite some supply chain constraints, reflecting resilient consumer demand. Further, its business in Europe was recovering ahead of expectations, it added. "We expect organic operating margin to benefit from a further recovery in sales volumes, positive channel mix and premiumisation trends, while we are continuing to invest in our marketing and commercial capabilities. As previously indicated, we are managing rising inflationary pressures, which are partly due to supply chain constraints," said Chief Executive Officer Ivan Menezes.
----------
3i Group said Chair Simon Thompson will not seek re-election the company's 2022 annual general meeting. 3i Group said David Hutchison, currently senior independent director and chair of 3i's valuations committee, will become non-executive chair following the announcement of its half-year results, which is expected to take place on November 11.
----------
COMPANIES - MAIN MARKET AND AIM
----------
Tortilla Mexican Grill said it will have a GBP70.0 million market capitalisation when it starts trading on AIM on October 8. The London-based fast-casual Mexican-themed restaurant chain has 62 sites worldwide, 52 of which is in the UK and 10 are franchised sites in the Middle East. It priced its initial public offering at 181 pence per share, raising GBP5.0 million for the company and GBP23.0 million for selling shareholders.
----------
COMPANIES - GLOBAL
----------
Regeneron Pharmaceuticals and Roche Holding said a drug cocktail the pair have developed "significantly" lowers viral load in some hospitalised Covid-19 patients. The study, part of the UK's 'Recovery' trial, met its primary endpoint. Covid-19 sufferers receiving both casirivimab and imdevimab saw "significantly reduced viral load within 7 days of treatment". The study was conducted on hospitalised patients who did not need mechanical ventilation In addition, those taking the drug cocktail had a reduced risk of death by day 29. In the general population, the risk of death fell by 36% while in those that were seronegative at baseline, meaning they registered a negative Covid test, the reduced risk of death was 56%. The US Food & Drug Administration is mulling whether to add hospital treatment to its authorisation for the drug cocktail, Regeneron explained.
----------
Thursday's Shareholder Meetings
ActiveOps PLC - AGM
Altitude Group PLC - AGM
Anglesey Mining PLC - AGM
ARGO Group Ltd - AGM
Bigblu Broadband PLC - GM re return of capital
BioPharma Credit PLC - AGM
Chill Brands Group PLC - AGM
DCD Media PLC - AGM
Diageo PLC - AGM
Genedrive PLC - GM re share placing
Insig AI PLC - AGM
Kibo Energy PLC - AGM
Merit Group PLC - AGM
Merit Group PLC - GM re share subscription
NWF Group PLC - AGM
Ormonde Mining PLC - AGM
Pennpetro Energy PLC - AGM
PHSC PLC - AGM
San Leon Energy PLC - AGM
Science Group PLC - GM re share issue and buyback authorities
Sosandar PLC - AGM
Supreme PLC - AGM
Tate & Lyle PLC - GM re North and South America stake sale
TheWorks.co.uk PLC - AGM
Trafalgar Property Group PLC - AGM
Walls & Futures REIT PLC - AGM
----------
By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.
Pearson (PSON)
Ferguson (FERG)
Boohoo (BOO)
Trainline (TRN)