Omicron Wave expected to slow Fast Fashions earnings growth

Fast fashion retailer Boohoo said an increase in the number of customers returning outlet wear such as dresses would potentially affect its sales and profit this year. The group’s Coast and Karen Millen brands, acquired in 2019, sell more high-end products and both brands are well known for formal wear.

Despite an “unusually high” proportion of dresses sold in the quarter to November, customers are returning them at higher than usual rates, which is linked to the cancellation of events and gatherings in accordance with the latest directives from the British government. Boohoo’s return rates were 12.5 percentage points higher than the same period in 2020.

There was little awareness among the UK public of the impact of the ramp-up of the latest Omicron variant when shoppers bought outfits for Christmas parties and events in November; many were determined to make up for the previous year when gatherings were not allowed.

However, this week the UK’s Chief Medical Officer, Professor Chris Whitty, made it clear to the public that during the final days of Christmas the public should stay home unless it “really matters”.

Even Her Majesty said it was ‘with regret’ that an annual royal meeting would not go ahead as planned – but was ‘the right thing to do’ as the new variant of Covid-19 spreads across across the UK.

Boohoo Managing Director John Lyttle said: “The strong performance of our core market in the UK, across our established and acquired brands, demonstrates the potential to capture and grow market share in key markets.

“In international markets, our proposition continues to be significantly impacted by the continued disruption of services due to the pandemic, which, in addition to recent heightened consumer uncertainty, has weighed on our performance.”

“The current headwinds are short-term and we expect them to ease as the pandemic-related disruptions begin to ease.”

Boohoo also highlighted challenges over supply chain issues in this week’s announcement, with the online retailer’s shares falling around 15% to the lowest level since 2016.

The retail sector has been rocked by global material shortages, rising prices and transport delays, all of which coincide at a time when there has been a significant increase in demand for consumer goods.

Buyers faced empty supermarket shelves and brands like ASDA and Ikea chartered cargo ships in a bid to take control of the problem, bypassing middlemen.

Boohoo’s distribution network in the UK has enabled the brand to offer faster dispatch through local warehouse storage which has facilitated the delivery of clothing to UK consumers.

The brands distribution network has undergone significant investments in automation to increase efficiency and cost savings. Its faster delivery times and quick refunds to customers have been the recipe for sales success.

Boohoo said UK net sales were up 32% on a year ago in the three months to November, reflecting “exceptional” UK demand.

“The group has gained significant market share during the pandemic. The current headwinds are short-term and we expect them to ease as the pandemic-related disruptions begin to ease,” Boohoo Chief Executive John Lyttle said.

The Boohoo Group includes brands such as Nasty Gal and PrettyLittleThing as well as recent acquisitions such as Debenhams and Dorothy Perkins. All have seen strong sales throughout the pandemic as shoppers moved online, unable to access other high-street fashion brands such as Primark.

Boohoo Group expects freight costs to the UK to be around £20m higher this year as trade faces continued consumer uncertainty. Long delivery times and rising costs are hampering its European and overseas trade.

The group’s statement highlights the belief that “pandemic-related disruptions will begin to subside”, but if the problems persist in the longer term, the effect could be particularly harsh for the Boohoo brand and indeed for the rest. of the retail sector.