UK's Boohoo expects better 2023 after profit slump

By James Davey

LONDON (Reuters) -British online fashion retailer Boohoo forecast a better performance in its new financial year after profit halved in 2022/23 when shoppers were hit by a cost-of-living crisis and many returned to physical stores post-pandemic.

Shares in Boohoo were up 12% in morning trading on Tuesday, paring losses over the last year to 46%, after the group said it would stem a decline in sales and increase profit this year.

It also expressed confidence in its medium term prospects.

"We see a clear path to improved profitability and getting back to double digit revenue growth," CEO John Lyttle said.

Boohoo and rival ASOS grew rapidly as 20-somethings around the world snapped up their fast fashions, and demand surged again during the pandemic when high street rivals were shuttered by lockdowns.

But supply chain issues, higher product returns, competition from rivals like Shein and rapidly rising living costs hit them hard.

Boohoo made adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), its key profit measure, of 63.3 million pounds ($79.9 million) in the year to Feb. 28, slightly ahead of analysts' consensus but down from the 125.1 million pounds made in 2021-22.

Revenue fell 11% to 1.77 billion pounds.

Boohoo forecast revenue in 2023/24 would be flat to down 5%, with a focus on profitable sales, and adjusted EBITDA would rise to between 69 million and 78 million pounds, in line with market expectations.

Boohoo expects sales to fall by 10% to 15% in the first half, before a return to growth in the second half.

It has taken action to cut costs, such as reducing the level of stock it holds by 36% over the last year, and is increasing automation.

It is also investing in key projects, such as a distribution centre in the United States, which it says will drive a "step change" in its offer there.

Its new financial year will also benefit from the easing of supply chain disruption and lower freight rates.

For the medium term, Boohoo is targeting a 6% to 8% adjusted EBITDA margin, up from the forecast 4% to 4.5% for 2023/24.

The group ended the year with 331 million pounds of liquidity headroom.

Last week ASOS, which overhauled its business model last year, reported a first half loss and forecast a further decline in sales, hammering its shares.

($1 = 0.7923 pounds)

(Reporting by James Davey; editing by Sonali Paul, Kirsten Donovan)