British online fashion retailer Boohoo plc’s profits have reportedly taken a severe hit as online shoppers are returning clothes at a faster rate than they did before the Covid-19 pandemic.
The brand’s profits have plunged by more than 94% to £7.8 million ($9.6 million) in the year ending February 2022, while its sales grew by 14% from the previous year to £2 billion ($2.5 billion), well above the pre-pandemic levels as high streets closed and consumers took to online shopping.
However, with ease in restrictions, customers are going back to shop in physical stores, with Boohoo stating that its online shoppers were returning items bought online faster that it expected during the second half of 2021.
Returns are a major headache for fashion retailers as they indicate that the business is not doing well.
Many consumers also had to change their spending habits due to the rising cost of living, as per official data.
Costs of items in stores are going through decade-high increases. According to the British Retail Consortium, shop prices climbed 2.7% y-o-y in April, the highest recorded since 2011, having increased from 2.1% in March.
The pandemic also caused major disruptions and setbacks for the fashion retailer, such as higher shipping costs and overseas delivery delays, which it expects to continue into this year as well.
Delay in international deliveries due to coronavirus has also caused problems in getting stock to reach customers from factories. The brand expects these issues to continue for some time.
However, in order to overcome these issues, Boohoo stated that it is making its delivery network bigger and supply chain more flexible, with plans to also invest in a new distribution hub in the US.
This could mean that its clothes could become costlier as the company has only committed to ‘mitigating wherever possible before passing on the prices to consumers’.
Boohoo added that due to lockdowns in some of the major countries where Boohoo sells, such as China, consumers were not buying as much.
Following the news of decline in profits, Boohoo’s shares plummeted by over 15%.
Source credit: https://www.bbc.com/news/business-61318087