What's going on?
British online retailer Boohoo gave an upsetting quarterly results update on Thursday.
What does this mean?
Boohoo indeed: the company came into this update having admitted that it might not grow sales at all in the first half of its financial year, which started in March. It figured a slowdown was all but inevitable for a couple of reasons: because cash-strapped shoppers have been returning more clothes than usual, and because supply bottlenecks have clipped the wings of its fledgling US business.
So it surprised no one when Boohoo said on Thursday that its sales fell 8% from the same time last year, partly down to its first-ever drop-off in UK sales. The retailer – whose other brands include PrettyLittleThing and Nasty Gal – blamed intense competition, but it also said that comparing today’s inflation-bruised figures to last year’s post-lockdown boom didn’t do it any favors. And while Boohoo stood by its full-year revenue outlook, that isn’t saying much: it would still be the smallest uptick in sales since the company listed in 2014.
Why should I care?
For markets: Every investor for themselves.
Rival ASOS is in exactly the same sinking ship as Boohoo, downgrading its sales growth forecast for the year from 10-15% to 4-7% on Thursday. Investors, for their part, clambered over each other to reach the exits: Boohoo and ASOS’s stocks dropped 15% and 20% after each of their announcements, meaning they’re now down 53% and 62% this year.
The bigger picture: The BoE plays catch-up.
Boohoo might want to spare some tears for when consumers are really pinching the pennies, because the Bank of England just upped its key interest rate by 0.25% for the fifth time in a row, bringing it to a 13-year high (tweet this). The central bank also said it’s now expecting inflation to top 11% later this year – up from its previous forecast of 10% – and that it was prepared to act “more forcefully” with rates going forward.