‘Even by its own measures, Boohoo faces a long path to recovery’

Boohoo chief executive John Lyttle understandably put a glass-half-full spin on the fashion retailer’s full-year results this week.

Boohoo, he maintained, is “well positioned to return to growth”. Well, if a business is not actually growing then being “well positioned” for that eventuality is perhaps the next best thing.

The group reported a 17% slump in revenue last year, when adjusted EBITDA – the pureplay’s preferred gauge of earnings – slid 7%. You’d hope, after those sorts of numbers, that growth and not anything else would be the direction of travel.

To be fair to Lyttle and Boohoo, the numbers – although disappointing – did actually meet rather than miss expectations.

 “Boohoo also faces the rising threat of a new generation of online retailers, such as Shein and Temu, who may now disrupt the original disruptors”

As with other retailers, the performance came amid tough trading conditions. Boohoo did manage to push up gross margin as costs savings bore fruit, and it has invested in infrastructure for that future growth for which it is “well positioned”, such as automation and a US distribution centre.

However, Boohoo’s own KPIs did not tell a happy story.

Active customer numbers over the year fell 11% to 16 million. Average order frequency fell 9% and the number of orders was down 13%. Average order value was down 3% and the number of items per basket slipped slightly. On the upside, Boohoo’s conversion rate was ahead 2%.

Those KPIs illustrate starkly how, by its own measures, Boohoo – like its rival Asos – faces a long path to recovery. As it pursues that path, Boohoo also faces the rising threat of a new generation of online retailers, such as Shein and Temu, who may now disrupt the original disruptors.

Boohoo chiefs maintain the business is “well placed to serve a global customer base”. But to what extent? The UK accounts for 63% of Boohoo’s revenue, dwarfing each of its other main markets such as the US, where sales of £299.1m last year – down 18% – compared with £921.5m at home.

“Shein’s sales are believed to have reached $45bn. That shows the extent of the competition that Boohoo increasingly faces” 

Shein, which is growing apace in numerous countries, is thought to have more than doubled its profits last year to more than $2bn (£1.6bn) – more than Boohoo’s annual group revenue of £1.46bn.

Shein’s sales are believed to have reached $45bn. That shows the extent of the competition that Boohoo increasingly faces as it battles to get itself on the right track – and as Shein ponders a blockbuster listing in either New York or London.

Boohoo isn’t necessarily destined for a pedestrian future. Its share price did not move much following this week’s results, indicating that while the City was hardly overjoyed, there were no alarm bells suddenly ringing.

Boohoo’s own big dipper trajectory may also, ironically, prove a foretaste of what may come if Shein pursues an IPO. The online giant has, like Boohoo over the years, attracted fierce criticism of some of its alleged practices and the sweetheart status it seems to enjoy at present could fall away.

But, if Boohoo expects to survive and thrive, it will need to deliver on the second part of Lyttle’s comments this week. Boohoo may be well positioned for growth, but it also needs to ensure that it really is “focused on ensuring that growth is both sustainable and profitable”.