Profits at prominent online retailers boohoo and Zalando have taken a major hit.
Despite group sales jumping 61 per cent in the past two years and a 27 per cent hike in revenue, British fashion brand boohoo recorded a pre-tax profit decline of 94 per cent to £7.8 million in its financial results for the year ended 28 February 2022.
The UK business said that growth was impacted by returns rates “increasing significantly” in the second half of the year, as well as extended international delivery times.
"Over the past two years, we have significantly increased market share in our core geographies of the UK and the US, and we have grown active customer numbers by 43 per cent across the group to 20 million,” said John Lyttle, group chief executive of boohoo. “In the year ahead we are focussed on optimising our operations through increasing flexibility within our supply chain, landing key efficiency projects and progressing strategic initiatives such as wholesale and our US distribution centre.
"This will ensure that the group is well-positioned to rebound strongly as pandemic-related headwinds ease."
German e-commerce multinational Zalando also made a €51.8 million loss in the first quarter of the year.
The company said that its results had been impacted by macroeconomic factors following strong growth in 2021.
It says that rising inflation and increasing costs for households has driven a “more cautious consumer sentiment” whilst at the same time eased restrictions meant less people shopping online.
“Our business fundamentals are strong, and we are taking steps to improve our results,” said Robert Gentz, Zalando co-chief executive. “We are managing Zalando for the long term and have always used our business agility and adaptability to successfully respond to short-term challenges and consumer demand to emerge better and stronger.
"We remain confident that we will achieve our ambition to reach more than 30 billion euros GMV by 2025.”
Zalando added that despite a challenging quarter, the company made “substantial progress” to deepen customer relationships and transform the business to a platform model.
Original Article: https://www.retail-systems.com/rs/Profits_A_Boohoo_And_Zalando_Take_Major_Hit.php