The Boohoo Group, which owns brands such as Karen Millen, Pretty Little Thing and Debenhams, says marketing remains “absolutely vital” to the success of its business and has committed to continued investment even as it slashes its forecast for the year.
Speaking to investors today (3 October), chief executive John Lyttle said the company was focused on investing in “agility”, “speed”, price and marketing. He described these investments as “short-term pain that helps protect our brands and places [them] well for future growth opportunities”.
This commitment comes in the context of significant revenue declines for the company in the six months to the end of August, which has led to it downgrading its expectations for the year. Revenue in its first half dropped 17% versus the same period last year.
Boohoo Group had previously forecast that its full-year revenues would fall somewhere between flat and a 5% decline year over year. Today, it said it expects revenues to decline between 12% and 17% in its 2024 financial year.
You’ll find it no surprise to hear that marketing remains absolutely vital to the success of our business.
Shaun McCabe, Boohoo Group
Despite these downgraded expectations for its near future, Lyttle said investing in marketing is “absolutely the right thing to do” for the longer-term health of the business.
The purpose of the investment is to ensure the group’s brands and business can rebound strongly “when growth returns”, chief financial officer Shaun McCabe said.
“You’ll find it no surprise to hear that marketing remains absolutely vital to the success of our business,” he stated, saying the business was focused on making “targeted investments” in specific growth opportunities as well as creating brand activation campaigns.
Marketing as a percentage of sales grew 170 basis points in the first half versus the same period last year. Overall marketing spend for the half was £90m. This is actually down by 4% versus the actual figure in the first half of 2022.
The fast fashion retailer is also investing in price as it looks to return to growth. As it sees raw materials and input costs go down, it is seeking to reinvest these into lower prices.
“We’re very confident that investing in price will drive volume,” Lyttle said.
The company asserted that, across the apparel industry, prices as a whole have increased by 8% on average versus last year. Across the Boohoo Group, prices are down 1% versus last year, it said.
The company has also focused on expanding its entry point ranges across its brands, Lyttle added.
As a fashion retailer, Boohoo Group must react to trends to meet the demands of its target consumer.
GlobalData apparel analyst Louise Deglise-Favre stated Boohoo’s fast fashion brands have struggled to keep up following the “meteoric rise” of Chinese rival Shein.
“Shein is more agile than Boohoo and offers unbeatable low prices while keeping up with the endless stream of new micro-trends appearing on social media,” she said.
Boohoo CEO Lyttle said the company had invested in being more agile and meeting consumer demands.
“We are focused on backing winners, being able to identify those products that gain traction with customers quickly and placing repeat orders multiple times in a season to maximise their success,” he said.
The company’s core brands, which include Boohoo, Karen Millen and Pretty Little Thing, outperformed the rest of the business. These brands saw a revenue decline of 10% in the half.
GlobalData’s Deglise-Favre noted this indicates that more recently acquired brands, like Wallis and Dorothy Perkins, are “dragging down” the group’s performance.
“These brands continue to suffer from the dull brand images they had prior to their acquisitions, and the Boohoo Group so far has been being unsuccessful at refreshing their identities, missing out on the opportunity to diversify its total customer base to a wider age range,” she said.
Lyttle said these smaller brands could be alternatively described as “labels”, which largely exist under the Debenhams brand. There is the capacity to scale up these smaller labels if they see success, the company said.