Wednesday, October 27, 2021

Boohu’s margins fall due to higher freight and labor costs

LONDON – British online fashion retailer Boohoo warned on Thursday that full-year profit margins would be lower than its previous guidance due to increased freight costs in the supply chain and higher wages for distribution center workers.

Group shares fell 11 per cent, widening year-on-year losses to 37 per cent as adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margins from 9 per cent for the full year 2021-22 was expected to be 9.5. percent, compared to the previously directed 9.5 percent to 10 percent.

“The advanced short-term cost headwinds experienced in the first half along with the recent freight inflation in our supply chain and wage inflation within our distribution centers are expected to continue in H2,” it added.

The group, which is seeking to repair its image after negative publicity over supply chain failures, also raised its guidance for full-year capital expenditure to £275 million ($376.2 million), up from the first £ 250 million ($342 million).

It plans to open a new distribution center in North America in 2023.

Boohoo generated adjusted EBITDA of £85.1 million ($116.5 million) in the six months to August 31, down 5 percent from the same period last year, reflecting £26 million ($35.6 million) of additional freight and logistics costs .

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First half sales rose 20 percent to 975.9 million ($1.33 billion) and are projected to be up 20 percent to 25 percent for the full year, meaning the second half grew 20 percent to 30 percent.

Buhu said consumer demand has improved in both August and September.

Finance chief Neil Cato told Reuters the firm was in a “fairly good position” with respect to seasonal workers for its distribution centres, although it still needed to recruit another 1,000 in Britain’s tight labor market.

“We are attracting employees with higher salaries and potentially some bonuses,” he told Reuters.

He said the prices for the current season of buhu are “a few percent” higher year-on-year due to increased import costs.

Cato said Boohoo plans to maintain the delivery option during peak trading periods in line with previous years.

On Wednesday, Next warned that labor shortages could affect Christmas deliveries.

In January, Boohoo bought the Debenhams brand from the administration for £55 million ($75.3 million), and in February the Dorothy Perkins, Wallis and Burton brands from the administrators of Arcadia for £25.2 million ($34.5 million).

by James Dewey

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This News Originally From – The Epoch Times

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