The FY24 results were “in line with market expectations, against [a] challenging market backdrop”, but its share price still dropped in early trading.
There’s no denying that these weren’t the kind of results the company would have expected to post at this stage just a few years ago when it was looking almost unstoppable as the e-commerce revolution powered ahead.
So let’s look at the figures. Revenue of £1.461 billion, was down 17%, “reflecting our increased focus on profitability” but in the face of “difficult market conditions”. Revenue was also impacted by the growth of its marketplace model based on commission-only revenue.
GMV was down 13% to £1.809 billion, although it saw a “positive trend” in the performance of its “core brands” (Boohoo, BoohooMAN, PrettyLittleThing, Karen Millen, and Debenhams External Marketplace), with their decline slowing from a 9% fall in H1 to a 4% drop in H2.
On the plus side, the gross margin was 51.8%, up 120bps vs FY23, “reflecting growth of marketplace, the impact of our cost savings programme and freight and raw material price decreases”.
But on an adjusted basis, EBITDA fell 7% to £58.6 million, although this was 4% of revenue compared to 3.6% of revenue in the previous year. This reflected “improvements in gross margin, cost reduction initiatives and value unlocked from automation investment”.
Adjusted EBIT was down 24.9% from a profit of £6.9 million to a loss of £18 million. The adjusted loss before tax widened almost 30% to £31 million.
And on a statutory basis, the loss before tax widened by almost 70% to £159.9 million and the company’s net cash at the year end flipped from a positive £5.9 million to debt of £95 million, “driven by our investments in US inventory and capital expenditure”.
Yet the group said it has a “robust balance sheet with £123.7 million of land and buildings, £200.3 million of fixtures and fittings, £208 million of inventory and [a] £29.9 million investment in Revolution Beauty”.
Other negative figures included its active customer numbers dropping 11% to 16 million, but the conversion rate rose slightly by 80bps to 3.82% from 3.74%. Average order value slumped 3% to £51.68 and the number of items per basket dipped slightly. Average order frequency was down 9%, “reflecting the impact of the macro environment on consumer demand”.
That said, operating costs of £699 million were down 16%, driven by the ongoing cost savings programme. And while holding huge amounts of stock is usually seen as a negative, the company’s inventory having increased by £29.9 million was largely driven by the investment in stock levels to support the opening of the US distribution centre, which should be a positive in the longer term.
Regional performances
Boohoo said its UK revenues declined 16% reflecting the impact of the macro environment on consumer demand, as well as price investments and the increase of the Debenhams marketplace within the sales mix.
The UK market continues to be its largest, accounting for 63% of revenue. Its revenue there was down to £921.5 million, but the gross margin improved from 47.9% to 50% and return rates “have reduced slightly, which is attributable to product mix, the capturing of deflation in our supply chain and pass-through of lower prices to our consumers”.
International revenues declined 20%, with extended delivery times continuing to dent sales, as well as tough comparisons against strong wholesale the year before.
US revenues specifically declined 18% to £299.1 million, dented by those longer delivery times. But the successful go-live of the group’s US distribution centre in August has “transformed the delivery proposition”.
Return rates also dropped year on year, but the gross margin reduced from 58% to 55.9% reflecting the brand mix as well as the impact of duties associated with the new distribution centre.
Revenue in the rest of Europe fell by 20% year on year to £165.8 million, again affected by tough comparisons with strong wholesale a year earlier. The gross margin improved slightly from 52.% to 52.7% and return rates dropped.
And revenue in the rest of the world plunged 30%, although the gross margin improved from 50.7% to 54.8% with return rates once again falling.
Looking ahead
As for its outlook, the company said it has taken “significant steps to reposition the group for sustainable, profitable growth” and expects targeting GMV growth, as well as continued improvements in adjusted EBITDA margin.
It said it’s still “confident” in its 6-8% medium-term EBITDA margin target. And it added that in FY25, it will “continue to leverage the increasing efficiencies generated by our investment in automation and capacity with an ongoing focus on cost reduction”. It’s on track to deliver more big cost savings and expects to generate “positive free cash flow in FY25”.
Admittedly, “trading conditions have remained challenging due to cost inflation, uncertain consumer demand and normalisation of the channel shift online”, but the group said it “has a strong business model and clear strategy which it is focused on executing to unlock market share”.
CEO John Lyttle highlighted the firm’s “highly loyal customer base” and said the company made continued progress during the year, despite the many challenges, with the improved performance of its core brands particularly encouraging.
He concluded that Boohoo Group is “now well positioned to return to growth, and we are focused on ensuring that growth is both sustainable and profitable”.
