Tears for Boohoo after sales and profits slide

Troubled online clothing retailer boohoo issued a profit warning as the cost of living squeeze dented demand.

The group, which owns brands Pretty little Thing and Karen Millen, said profit margins for the year to February 2023 were expected to be between 3pc and 5pc, down from the 4pc to 7pc predicted in May.

Boohoo blamed rising costs, saying that its sales fall is expected to ‘persist’.

Boss John Lyttle said performance was dented by ‘a more challenging economic backdrop’, and highlighted ‘significantly’ higher numbers of returns.

Profits for the six months to the end of August plunged by 90pc to £6.2m, alongside a 10pc drop in sales to £882m. ‘Investors may well be crying into their cornflakes,’ said derren Nathan, the head of equity research at Hargreaves lansdown.

‘Profits are being squeezed both at the top line and through higher costs and this looks set to continue.’

While the opening of a US distribution centre and automating its Sheffield warehouse provide hope for the future, Nathan added it was going to be tough amid the ‘deepening’ cost of living squeeze.

But the shares rose 8pc, or 2.92p, to 39.65p, though they are down 65pc so far this year.

Boohoo has become the most shorted stock in the UK, according to data from Short Tracker, as it battles falling sales and the fallout from a greenwashing probe by the Competition and Markets Authority.

Its troubles form part of a wider fall from grace for the online fast-fashion giants, which boomed during lockdown but have since been hit by inflation and the end of pandemic restrictions, which has revived competition from high street rivals.

Asos has also issued a profit warning for the year.