Boohoo tumbles as reality of online clothes shopping hits home | Nils Pratley

This time last year Boohoo had a stock market value of £4bn and seemed to be flying. It was lording it over the high street by buying up its deadwood brands for online rejuvenation; pandemic trading conditions were delivering a whoosh to revenues as the likes of Primark had to close their doors.

Boohoo CEO John Lyttle pictured in 2019.
Boohoo CEO John Lyttle pictured in 2019.

And now? Two profit warnings later – plus a downbeat outlook statement on Wednesday – Boohoo is full of grumbles. Customers are returning more items, the bane of an online retailer’s life, as they ease out of lockdown joggers and into smarter kit.

Freight rates to the US have doubled and delivery times have extended, undermining the economics of selling fast-fashion items to Americans from warehouses in Burnley and Sheffield.

The marketing bill has exploded because brands like Debenhams and Karen Millen don’t reinvent themselves. And the backdrop is consumer demand described as “subdued”.

Boohoo’s market value has fallen to £1bn and the share price stands at 70p, virtually the lowest it’s been since 2016, a year when annual revenues were £295m, as opposed to the near-£2bn just reported for the last financial period.

Whistling cheerfully, John Lyttle, the chief executive, reckons Boohoo is “well-positioned to rebound strongly as pandemic-related headwinds ease”.

Well, maybe, just don’t expect the bounce to come soon. Top-line profits, having just fallen 28% to £125m, will likely go sideways since margins this year are pencilled in for 4% to 7%, as opposed to 10% that Boohoo used to knock out reliably in the old days.

Meanwhile, a mammoth distribution centre has to be constructed in Pennsylvania to solve the US headache. In basic terms, costs are rising and the demand picture is unclear with price rises (probably) on the way.

Aside from building some US infrastructure earlier, it’s hard to see what Boohoo should have done differently, but maybe that’s the point: the online clothing game is a fiddly business and requires a lot of things to run perfectly. Over at Primark, which resolutely sticks to fuddy-duddy physical shops, life looks easier.

Heat is on for Just Eat

The sense of chaos at Just Eat Takeaway gets worse. Adriaan Nühn, chair of the supervisory board, quit on the morning of the annual meeting on Wednesday, presumably to avoid a drubbing in the shareholder vote in Amsterdam on his reappointment.

Meanwhile, the chief operating officer, Jörg Gerbig, was unexpectedly pulled from the poll while the company investigates a complaint regarding misconduct.

The other directors got the necessary majorities to continue, despite the efforts of agitating shareholder Cat Rock Capital, with a 6% stake, to get half of them removed. But a weak endorsement, it is safe to assume, will not clear the air.

Step one would be a sale of Grubhub, last year’s calamitous $7.3bn (£5.7bn) purchase in the US that is in large part responsible for the 75% collapse in Just Eat’s share price from its peak. The company has said it is reviewing its options, but, until it finds a workable solution, there’ll be a suspicion of going through the motions.

Step two would be exit for Jitse Groen, the Dutch founder who led the acquisition drive that was clearly overambitious. If Just Eat still had its primary listing in London and had not decamped to the Netherlands, one suspects he’d be feeling more heat.

Hard road ahead for Aston Martin

The board of every luxury carmaker wishes their firm could be more like Ferrari, so there’s no shame in Aston Martin Lagonda hiring a former boss of the star Italian outfit as its chief executive.

Amedeo Felisa, 75, actually retired from Ferrari six years ago but he’s definitely experienced and, since he’s already an Aston Martin non-executive director, should know what he’s walking into.

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One feature is a demoralised workforce, if Aston Martin’s heavy emphasis on adopting “a more collaborative way of working” is a guide; it read as a hint that the departing Tobias Moers, a former Mercedes-Benz chief who was Lawrence Stroll’s big hire after rescuing Aston Martin two years ago, overdid the hard-driving approach. If so, changing the driver is a risk worth taking.

Aston Martin cannot, though, afford detours from here. A desperately needed refinancing looms next year with the aim of reducing the nosebleed rates of interest currently being paid on borrowings that totalled £957m at the end of March.

The interest bill could be £195m this year, a legacy of the desperate financial position in 2020. Stroll thinks he’s got the right chief executive this time; he needs to be right.