Boohoo likely to raise prices after pre-tax profits fall 94%

theguardian.com:

Boohoo has admitted its clothing prices are likely to rise this year after profits almost halved amid weakening consumer demand and rising costs.

The online fashion specialist said pre-tax profits fell 94% to £7.8m in the year to 28 February. Sales rose 14% to almost £2bn but growth was down more than 40% in the previous year, as deliveries overseas were held up by disruption to international shipping and wavering demand during the pandemic.

The cost of shipping and flying in goods from factories was up £22m, while the bill for posting them out to customers rose £38m. Marketing costs also soared as Boohoo relaunched new brands bought during the pandemic including Debenhams, Dorothy Perkins and Burton.

Profits and sales took a hit as customers returned more unwanted items than they had during the pandemic lockdowns, when the group sold more stretchy garments, such as leggings and hoodies, where an exact fit was less important.

The company said it expected to continue to face increased costs in the year ahead and was aiming to “maximise efficiencies”, including adding more automation at its warehouses, to help cut costs “before passing prices on to consumers”.

It said sales growth was likely to drop to less than 5% for the year to February 2023 amid “uncertain consumer demand” and ongoing problems with transporting goods around the world. Sales are expected to fall until the end of May and then to recover somewhat.

Shares in Boohoo dived more than 10% on Wednesday morning to 71.6p, as analysts said they expected Boohoo’s underlying profits for the year ahead to be about 18% below previous expectations.

Boohoo said in a statement: “We remain extremely confident in the group’s future growth prospects, and as short-term demand