boohoo Group PLC shares plummeted on Wednesday after the online retailer posted a sharp annual profit plunge driven by high item return rates, subdued consumer confidence and international woes.

Shares in the company were down 17% at 66.60 pence each in London on Wednesday morning. The stock has sunk 80% over the past 12 months.

The AIM listing’s pretax profit in the year ended February 28 dropped 94% to £7.8 million from £124.7 million a year prior.

Revenue increased 14% to £1.98 billion from £1.75 billion. Compared to financial 2020, revenue was up 61%. However, pretax profit was down 92% from the pre-lockdown comparative.

Revenue growth came despite global apparel markets sitting ‘below pre-pandemic levels’, the retailer said.

While revenue rallied, profit sunk.

‘Growth has however been impacted by three factors: firstly, returns rates increased significantly in the second half of the year ahead of both expectations and pre-pandemic levels; secondly, consumer demand has been subdued as a result of lockdowns in key markets throughout the year; and thirdly, our proposition internationally has been negatively impacted as a result of extended delivery times,’ boohoo explained.

boohoo’s adjusted earnings before interest, tax, depreciation and amortisation amounted to £125.1 million, down 28%, though in line with guidance.

In the UK, boohoo’s annual sales rose 27% and in the US, they climbed 3.8%. In the Rest of Europe segment, however, they declined 10% while in the Rest of World arm, they dropped 9.3%.

boohoo’s international operations were hurt by longer delivery times.

‘Airfreight capacity constraints, caused by the pandemic, also kept distribution costs to the more distant markets high and these are expected to continue for some time to come,’ the company cautioned.

For the new financial year, boohoo set out a list of priorities, as it eyes ‘optimising its operations’.

It will look to source from ‘near-shore markets’ in a bid to trim lead times that have been hit by supply chain pressures. boohoo also plans ‘tighter stock management’ and has kicked off a wider cost efficiency programme.

It will also look to upgrade its Debenhams technology platform, go live with automation at a distribution centre in Sheffield, England and also progress its US distribution centre.

‘By focusing on these areas, the group will be in a position of greater financial and operational strength, and well-positioned to rebound strongly as pandemic-related headwinds ease, allowing it to capitalise on its significantly expanded target addressable market, returning towards normalised growth rates of 25% per annum post-pandemic and adjusted EBITDA margin rebuilding back to 10%,’ boohoo said.

Its adjusted Ebitda margin in financial 2022 fell to 6.3% from 10.0% a year prior and 10.2% in the pre-lockdown financial 2020.

For the current year, it expects low-single digits revenue growth and an adjusted Ebitda margin between 4% to 7%. boohoo expects to continue being ‘impacted by pandemic-related factors’ this year.

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