Boohoo sales soar but shipping costs dent profits

Fast fashion firm Boohoo's sales have soared while profits plunged as a result of spiralling costs.

The online retailer saw sales jump 20% to £975.9m in the six months to 31 August, when compared with a year earlier.

But pre-tax profits fell 64% to £24.6m, partly due to shipping costs that were £26m higher than pre-pandemic levels.

Boohoo's chief executive said the company was "well-positioned to accelerate its growth".

A shortage of empty shipping containers and bottlenecks at some ports mean that many firms have been affected by soaring shipping costs.

In the UK, difficulties in international shipping have coincided with problems faced by businesses trading with the European Union (EU) after Brexit.

Boohoo said on Thursday that its profits had also been dented by duties being introduced on certain products worth more than €150 (£129) and extra checks at customs.

Boohoo, along with other online retailers, saw sales boom as shoppers turned to the internet amid the coronavirus pandemic.

On Thursday, it said that it had doubled its market share in the UK and the US in the last two years alone.

The group, which also homes Pretty Little Thing, Nasty Gal and Karen Millen, did say however that the number of items being sent back has returned to pre-pandemic levels.

Despite consumers since returning to High Streets as businesses reopened, its bosses remain confident that sales in the second half of the year will be strong.

John Lyttle, its chief executive, said: "Entering the second half of the year, the group is well-positioned to accelerate its growth.

"We will continue to invest across our platform, people and technology as we look to further cement our position as a leader in global fashion ecommerce."

It expects full year sales growth of between 20 and 25% for the year overall.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said of the latest set of results: "This is not Boohoo's best look.

"The fast-fashion giant is also being held back by enormous extra costs in its supply chains. Higher wages for its workers, plus the well-publicised freight and shipping disruption are all affecting profitability.

"These headwinds aren't going to disappear overnight, so it's crucial that sales get moving at a better pace."

The group cautioned that costs would continue to rise due to investments in its first warehouse in the US, offices in central London, and marketing new brands it has taken on such as Dorothy Perkins, Burton and Wallis.

In a call with journalists, Mr Lyttle also said that ongoing labour shortages were presenting a problem for the group.

"There's no doubt there's a challenge . . .  we are seeing demand on labour increasing and lower amounts of labour available than in previous years," he said.

In an update to investors, the group said it would be investing heavily in automation at its own warehouses in a bid to offset rising labour costs. It has already spent £50m on its Sheffield site, for example.

The company has faced scrutiny over conditions at its suppliers after some workers in Leicester were found to be earning below the minimum wage.

Following the revelations about working conditions last summer, Boohoo commissioned a report by Alison Levitt QC.

Among 17 recommendations in her report was that the company publish a list of its suppliers. It also included improving corporate governance at the firm to ensure more non-executives could hold the company to account.