A slide in the price of British competitor Boohoo due to a further lower sales outlook on Tuesday also brought an abrupt end to Zalando shares’ latest attempt at recovery. The news from Great Britain reminded investors of the industry problem of weak demand. As a result, the Zalando price fell to its lowest level in a year near the 20 euro mark on German Unity Day.
Boohoo shares led the way in London, with a recent slump of 9.1 percent. This was enough to hit an eight-year low because the British fashion retailer had lowered its profit and sales targets. This was related to poor consumer demand and the need to reduce prices to attract cash-strapped buyers. Inflation is currently curbing consumers’ willingness to spend money.
With the latest warning, Boohoo joins a series of bad industry news, as British competitor Asos recently also made disappointing statements about sales development. As it is said, competition in the online sector is also intense because consumers are increasingly returning to stationary retailers, especially when it comes to fashion, after the pandemic has subsided.
“The party is on hold,” said equity expert Aarin Chiekrie from asset manager Hargreaves Landsdown. The Boohoo shares recorded an impressive rally lasting several years from the IPO in 2014 until the Corona peak, as did Zalando. Since then, investors’ celebratory mood has been significantly dampened – not only by the reopening after the pandemic but also by the recently noticeable effects of inflation.
Boohoo announced on Tuesday with its half-yearly figures that annual sales were expected to decline by 12 to 17 percent. The company had previously assumed that revenue for the fiscal year would remain the same or decrease by a maximum of five percent. According to Hagreaves-Lansdown expert Chiekrie, even the new target currently seems like a big challenge.
Apart from the sales consideration, analysts mentioned the operational performance as positive. According to analyst Wassachon Udomsilpa from RBC, operating profit (Ebitda) exceeded expectations in the first half of the year. Jefferies expert Andrew Wade was hopeful that investments and operational progress will ultimately pay off. Boohoo is therefore well positioned as soon as demand improves again. (dpa)