Tears for Boohoo.com after shares plunge on profits warning

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Shares in online fashion retailer Boohoo.com plunged by almost half yesterday after fierce discounts across the industry hit sales and forced it to slash full-year profit forecasts.

The Manchester-based company, which listed on the stock market in March, blamed price cuts by high street rivals looking to shift jumpers and coats following a warm autumn season for slowing demand in the run-up to Christmas. Analysts said the firm may have also suffered from its weaker profile compared with more established rival ASOS, warnings of delayed courier deliveries in the run-up to Christmas and the fact it cannot offer shoppers a place to collect goods, with a click-and-collect option.

Many web retailers like Boohoo are counting on rapid revenue growth to counter big investments in their businesses.

But their competitive edge has been softened as traditional stores such as Topshop and Debenhams have upped their online game, with improved websites and mobile platforms.

Click and collect – where goods bought online can be collected in shops – has become an increasingly popular element of retailers’ web offerings.

Department stores John Lewis and House of Fraser this week both reported strong trading helped by click and collect demand.

Shares in Boohoo.com, which designs, sources, markets and sells own-brand clothing, shoes and accessories through its website to a core market of 16-24 year-old consumers in the UK and globally, fell as much as 45 per cent in early trading.

One of a number of retail floats last year, they closed at 22p, a fall of 41 per cent and 74 per cent a high of 85p in March.

News of the profit warning also sent shares in larger rivals ASOS and Zalando down 2.2 per cent and 5.2 per cent respect- ively.

“A retail backdrop that was impacted by unseasonal weather in the third quarter, crystallised a heavily promotional backdrop, negating some of Boohoo’s competitive advantage and perhaps exposing the early-stage nature of the brand,” analysts at Jefferies said, forecasting big cuts to market expectations.

Boohoo said revenue growth in the second half of its fiscal year – which runs to the end of February – would now be in line with a 25 per cent rise achieved in the four months to December 31, well below market forecasts for a big boost from a marketing push launched in October.

Its full-year core earnings margin is also expected to remain at 10 per cent, compared to expectations of 12.5 per cent.

In the UK, its biggest market, sales growth slowed from 47 per cent in the first half to 25 per cent for the four months.

Analysts at Investec pushed their full-year pre-tax profit forecast down 26 per cent to £11.8m.