Boohoo (BOO.L) stock slumps as firm warns of Omicron worry
10:41, 16 December 2021
Boohoo stock sank 16% in London trading this morning to 115.75p ($1.54) as the online retailer wound back its full-year sales guidance in a quarterly trading update.
Previously, Boohoo had anticipated 20% to 25% sales growth up to 28 February 2022. This has been dialled back to 12% to 14% as Omicron unease spreads; Boohoo has also clipped profit margins, flagging up higher freight and returns costs.
Freight costs, specifically, are estimated to impact earnings by around £20m in the financial year, the majority of which is in the second half.
Sales and earnings uncertainty
“It is the view of the board that the factors currently negatively impacting the business are primarily related to the ongoing impact of the pandemic and are, therefore, transient in nature,” Boohoo adds.
Boohoo’s stock price hit a June 2020 high close to 410p, however the fast fashion company’s rate of decline has been steady throughout 2021.
Group chief executive John Lyttle says the firm has gained a significant market share in the pandemic. “The current headwinds are short term and we expect them to soften when pandemic-related disruption begins to ease.”
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Discretionary spend pressures up
Exactly when the disruption will end remains open to huge speculation. Additionally, there is higher inflation feeding into the UK economy and the spectre of higher interest rates, too (a Bank of England announcement is expected shortly).
Boohoo adds that international performance across the group’s brands and markets have been impacted by significantly longer customer delivery times as a result of the pandemic.
The fashion retailer said: “The group continues to make significant investment into its infrastructure, including progressing plans for its US distribution centre, to support its future international growth ambitions with a network capable of delivering in excess of £5bn of net sales, and returning towards normalised growth rates of 25% per annum post-pandemic.”