It was once on par with SHEIN, but now it has suffered a loss of nearly 1.5 billion!

A series of factors, including global economic slowdown, deflation, and declining purchasing power , have led to more and more consumers turning to online shopping platforms instead of offline stores. In this environment, a number of e-commerce platforms have been forced into fierce competition, and "survival by competition" has become a synonym for major industries such as clothing, home furnishings, and retail groceries.

Among the numerous platforms, some have relied on their strong strength to break through the siege and gain a firm foothold, while others have seen performance decline, layoffs, or even closure. This trend is particularly evident in the fast fashion industry, where many brands have frequently closed stores, such as H&M, ZARA, and earlier GAP, NEW LOOK, Forever 21, Esprit, etc.

In addition, the protagonist we are going to introduce today is the British fast fashion giant Boohoo, also known as the "British version of SHEIN". It once won the hearts of countless girls with "6 pounds dresses, 8 pounds straight pants, and 9 pounds cardigan sweaters", and was very successful in the fast fashion clothing track. However, under the impact of other competing platforms, it has repeatedly encountered difficulties and is gradually going downhill.

Boohoo to face challenges including boss resignation, brand split

Foreign media reported that Boohoo is facing increasing pressure from shareholders to split its business.

Boohoo executives are reportedly considering measures to deal with falling share prices and declining sales, with some shareholders urging them to divest or sell brands acquired in recent years, such as Debenhams and Karen Millen. At the same time, the company's CEO John Lyttle will also leave while the brand is split and restructured.

Shareholders said the business split might help the company focus more on younger consumers, rediscover the market value of its business and boost its stock price.

Overall, this move is a wise choice for Boohoo at this stage. The company's management also generously stated that Boohoo seriously underestimated its business and now has to re-examine its future options.

On the one hand, data shows that in the six months to the end of August this year, Boohoo's total merchandise transaction volume (after returns) fell by 7% to £1.2 billion, and adjusted profits fell by 32% to just £21 million. In May this year, the company reported a pre-tax loss of £159.9 million, a significant increase from £90.7 million in the same period last year, while its revenue also fell from £1.77 billion to £1.46 billion, a drop of 17%.

According to statistics, in the past five years, Boohoo's share price has fallen by more than 85%, and its market value has continued to decline, currently less than 400 million pounds.

On the other hand, the economies of many countries have slowed down in recent years, and the market has shown a trend of weak consumption. Therefore, some "lower-priced and more diversified" clothing brands have become the favorites of consumers. Coupled with the continuous impact of well-known cross-border e-commerce platforms such as SHEIN and Temu that have emerged in recent years, Boohoo's performance is obviously not satisfactory, and how it will develop in the future is still unknown.

In addition, industry insiders pointed out that although the possibility of Boohoo's complete brand split remains uncertain, the sale of the two recently acquired Debenhams and Karen Millen in the future is likely to be the first step of the plan. The future fate of the company's other fast fashion brands, Boohoo, BoohooMan and PrettyLittleThing, is also unknown.

It is understood that Boohoo acquired Karen Millen for 18.2 million pounds in 2019 and Debenhams for 55 million pounds in 2021. Unexpectedly, the sales of these brands did not meet market expectations.

In fact, not only have the revenues of the brands acquired in recent years been poor, but the revenues of Boohoo's own brands have also fallen sharply. A closer look at the data reveals that Boohoo has actually been in a lot of trouble for a long time.

Losses, layoffs, Boohoo has been in trouble for a long time

Public information shows that Boohoo was officially founded in Manchester, UK in 2006 by Madhmud Kamani, an Indian businessman. At first, Boohoo mainly sold large-size women's clothing, and its sales channels were mainly offline stores and mail. With the prosperity of the e-commerce era, the founder resolutely decided to close offline stores and switch to online.

In 2006, Madhmud Kamani and Carol Kane launched the online platform boohoo.com, which gradually transformed into a fast fashion brand that "mainly sells fashionable, low-priced women's clothing."

Due to its fashionable and novel styles and low prices, most products are only about 100 yuan in RMB . Therefore, Boohoo products have won the love of countless European and American girls as soon as they were launched, and its development can be described as smooth sailing.

Thanks to this, the company was successfully listed on the London Stock Exchange in 2014, the eighth year after its establishment , with a market value of nearly 600 million pounds.

After going public, Boohoo has been making great strides, with both sales and stock prices growing significantly. In 2016, Boohoo acquired a 66% stake in the affordable e-commerce brand PrettyLittleThing (PLT) for £3.3 million, further expanding its market share. In 2019, its sales reached £856.9 million.

However, Boohoo seems to be going downhill since 2022. In the first quarter of 2022, the company's revenue fell 8% compared with the previous year, and its sales have declined for two consecutive quarters since the second fiscal quarter.

In 2023, the situation has not improved. At the beginning of the year, Boohoo announced layoffs in its London office. In response, a Boohoo spokesperson said, "In order to ensure the long-term and sustainable growth of the brand, we have made a difficult but necessary decision to consider reducing the number of positions in specific business areas." In other words, after the decline in revenue, the first action taken by Boohoo was to lay off employees to save costs, with a total of more than 100 layoffs. In order to control costs, Boohoo also asked different suppliers to offer discounts of 10% and 30%.

At the same time, its revenue in the first half of 2023 fell 17% year-on-year, and its core brand revenue also fell 10% year-on-year. Revenue in the UK, the United States and other European countries has fallen sharply.

In the year ending at the end of February 2024, Boohoo's sales fell by 13% and its net debt reached 95 million pounds. And its losses continued to rise, now approaching 160 million pounds. In addition, in the past few years, Boohoo has not only continued to fall into debt, but also laid off more than 1,000 people.

Investor Alan Oscroft analyzed that although Boohoo has the potential to turn losses into profits, it will still be in a loss-making state in the next few years. This trend will continue until at least 2027, and the profit-making method will also rely heavily on cost cutting and increasing profit margins, which will not last long.

However, its CEO is optimistic about Boohoo's future development, saying the company is well prepared to resume sustainable profitable growth.

Faced with the increasingly competitive fast fashion apparel market and the current debt challenges, it is still difficult to predict the future development of Boohoo. But what is certain is that if the company does not change its operating methods and does not make strategic adjustments in line with market trends, its sales will most likely continue to decline. However, if the "brand split" plan proceeds normally, then we have reason to believe that although Boohoo's road ahead is not easy, it still has the opportunity to turn losses into profits.