(Bloomberg) — Online U.K. clothing retailer Boohoo Group Plc issued a profit warning after customers returned more products in the U.K. and steep freight costs in the U.S. dampened demand there.
The online fashion retailer said it expects an adjusted earnings margin of 6% to 7% in the current fiscal year, in a statement Thursday. That compares to previous guidance of 9% to 9.5%.
Boohoo, which also owns the brand PrettyLittleThing, also revealed a sharp slowdown in demand with net sales growth expected to be 12% to 14%, down from an earlier forecast of of 20% to 25%.
The e-commerce group blamed the dip in performance on the fact that in the U.K., its core market, has been hit by significantly higher returns as customers send back items they did not want. Returns can be very costly for retailers to handle.
Online retailers, including Boohoo’s rival Asos Plc., were buoyed during lockdowns as returns fell as customers were buying more casual clothes for working from home and were less likely to send them back. As normal shopping patterns have returned as lockdowns eased returns have risen again. Boohoo is known for its going out and party wear outfits which generally do have a higher returns rate.
Boohoo’s growing business in the U.S. has also been hard hit by supply chain disruptions and steep freight costs. The group had previously warned in September, when it lowered its forecasts for sales and profitability, that it was being impacted by higher shipping costs. The supply snags have pushed its delivery times for customers in the U.S. to as much as ten days which has dented demand as shoppers switch to retailers with faster fulfillment speed.
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