After Boohoo posted a fall in revenue and profits for the six months to August 31, Retail Week looks at what’s going wrong at the fashion giant as it continues to fall behind in the fast-fashion battle
Despite saying it is working on “improved profitability and getting back to growth”, Boohoo posted a 17% decline in group revenue to £729.1m while profit also dropped 16% to £398.2m during the half.
As pureplay rival Shein continues to dominate the fast-fashion sphere amid a shrinking market in a post-pandemic world, Boohoo’s efforts to turn things around have not turned its fortunes just yet.
Retail Week explores why Boohoo is struggling as well as the biggest hurdles preventing it from winning the fast-fashion race.
Slowdown in volume recovery
Boohoo said in its latest trading update it has seen “slower volume recovery than previously anticipated”.
A source close to Boohoo told Retail Week the retailer has targeted more profitable sales, resulting in higher selling points, across its smaller labels such as NastyGal and MissPap. This has impacted sales volumes in the UK, where many of the labels are based.
The source added that international revenues had struggled this year, after enjoying a hugely successful 2022, boosted by a number of third-party deals such as with Kuwait-based fashion giant Alshaya Group.
“It is almost as if Shein has taken what Boohoo was doing really well and surpassed that, which is why it is such a problem for Boohoo”
Louise Déglise-Favre
Peel Hunt retail analyst John Stevenson said there is also an element around how people shopped last year, which has impacted Boohoo’s position when it comes to a slower volume recovery.
“People were buying a whole new wardrobe for spring/summer as well as formalwear and dresses, whereas now people are being a bit more discerning and buying by need. You are also seeing more of an impact of weather patterns coming through as well; there are a whole raft of challenges behind it,” he said.
He added that the rebalancing of stores versus online following the pandemic is also a contributing factor, with Boohoo and the other pureplay giants not recovering as quickly as retailers with a bricks-and-mortar presence. As shoppers continue to return to stores, this is proving to be an ongoing battle for Boohoo to win the customers over and bring the brand to the front of mind.
Shein strikes again
While Boohoo is bidding to return to growth, its rival Shein shows no signs of suffering from any slowdown in customer demand or trading.
In comparison to Boohoo’s latest figures, Shein posted annual revenue of $22.7bn (£18.8bn) last year, while its UK business reported £1.1bn in sales and a pre-tax profit of £12.2m for the 16 months to December 31, 2022, according to its latest Companies House filing.
GlobalData apparel analyst Louise Déglise-Favre said: “Boohoo’s struggles are largely due to the meteoric rise of Shein, which has jumped to the top of the ultra-fast-fashion game and continues to steal market share.
“Shein is more agile than Boohoo and offers unbeatable low prices while keeping up with the endless stream of new micro-trends appearing on social media.
“Shein has mastered the business model of fast fashion in every way. They are experts at the test and repeat model, they can ship very quickly, they also leverage the power of social media and collaborate with the right people.
“It is almost as if they have taken what Boohoo was doing really well and surpassed that, which is why it is such a problem for Boohoo. I think Boohoo may have also lost some of its focus and identity when it bought the Arcadia brands and other brands during the pandemic.”
Déglise-Favre added that while Shein is winning when it comes to fast-fashion, Boohoo has the advantage of being an older, established brand and that while it is going to be difficult, it still has an opportunity to compete with Shein.
She said that there is room for Boohoo to win shoppers over on sustainability efforts as well as take advantage if Shein has any missteps in the future.
Cut to the bone?
Boohoo identified more than £125m of annualised cost savings across its goods, supply chain and overheads during the half, which it said will be delivered across financial years 2024 and 2025.
Stevenson said in comparison to what Boohoo set out to achieve operationally this spring, the majority of its cost savings have already been put into action. But with the fashion retailer still struggling, have its cost-saving efforts reached their limits?
“If we go back to spring and look at what Boohoo wanted to achieve this year and how they have done against it, there is nothing they haven’t achieved. What you have got, though, is a very challenging market in terms of their sales position,” he explained.
With an eye to cost savings in terms of employee base, Stevenson said while Boohoo has already looked at its other central overheads, this doesn’t mean it won’t do more.
“They have done a lot of [cost savings] already but that is not to say that they aren’t going to do more. You’ve got to right-size the business for where it is today,” he said.
While it has put a great effort into cost savings across the business during the half, it is too early to see how much of an impact these savings have had for Boohoo.
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