Online retailer Boohoo posts its first-ever sales drop in the UK. It's considering charging customers for product returns.

Europe’s retail stocks are heading back toward pandemic lows. And after Thursday’s profit warning from Asos Plc. and the first United Kingdom sales decline in Boohoo Group Plc.’s history, it’s online merchants that are leading them there.

Asos shares sunk as much as 28% on Thursday, falling to the lowest since August 2010. The warning sent tremors through larger peer Zalando SE, which slid as much as 12% and pulled the Stoxx 600 Retail Index down to levels last seen in March 2020, when COVID-19 shock swept through every business sector. Boohoo slumped as much as 19%, hitting its lowest since June 2016.

“The pace at which online retailers have gone from sitting on cloud nine to being stuck in the gutter is quite remarkable,” said AJ Bell investment director Russ Mould.

Underperformance becoming a global phenomena

Consumers are less likely to spend on clothing and footwear due to a surge in food and energy bills. And the pain is spreading beyond clothing retail. Food delivery companies and athleisure stocks have also underperformed this year.

“The near-term remains pretty tough,” said Richard Saldanha, a global equity fund manager at Aviva Investors. “I think the consumer’s going to feel the pinch even more.”


The phenomena is global. The MSCI World Retailing Index, which includes the likes of Target Corp., Zalando and Inc., is on track for its first negative year since 2008. U.S. behemoths such as Walmart Inc. and Target have shaken investors.

Zalando ranks No. 5 in Digital Commerce 360’s Europe Database. Asos is No. 17 and Boohoo is No. 28.

Walmart ranks No. 2 and Target is No. 5 in the Top 1000 Database ranking e-retailers in North America.


What’s more, despite falling stock valuations, takeover bids are also faltering. A consortium backed by ecommerce investor Belerion Capital said Thursday it has decided to drop its pursuit of THG Plc., sending shares of the embattled U.K. online shopping emporium down as much as 23%. Property entrepreneur Nick Candy was also said to have walked away from making an offer.

Online retailer Boohoo posts its first-ever sales drop in U.K.

Boohoo Group Plc. recorded the first U.K. sales decline in its history. The online fashion retailer grapples with intense competition, supply-chain woes and waning pandemic consumer trends.

The fast-fashion company reported a 1% fall in its British home market and an 8% drop in overall sales in the first quarter, according to a trading update Thursday. Boohoo blamed the fall on tough comparisons with last year, when people were spending more online during lockdowns.


Boohoo stuck to its guidance for the full year of low single-digit revenue growth. It would be the smallest increase since its initial stock sale in 2014. Boohoo has also predicted profitability will be much lower than its historical average.

Boohoo warned last month that sales growth may grind to a halt in the first half as customers coming out of lockdown return more clothes and the nascent U.S. business battles with supply chain disruption and freight costs. The company, whose other brands include PrettyLittleThing and Nasty Gal, already cut its sales projections twice last year. It’s recovering from a labor supply scandal in 2020 that sparked governance changes. The shares have fallen 47% so far this year.

Boohoo mulls charging UK customers for returns

Boohoo is considering charging customers to send back garments as an increasing rate of returns crimps sales at the fast-fashion retailer.


The British firm’s business is purely online. It is reviewing its returns policy across all markets, CEO John Lyttle said in a phone interview. Boohoo already charges in some international markets, but the move would be a first in some places, including the U.K. The company is weighing the change after Zara owner Inditex SA recently imposed fees for online returns to tempt customers into its brick-and-mortar stores. Lyttle said a number of sellers are beginning to charge shoppers who send back goods.

Boohoo and Asos Plc both reported on Thursday slowing sales. Both retailers saw demand surge during pandemic lockdowns. Now, they contend with the return of normal shopping habits and persistent supply chain woes. When slashing its guidance for the year, Asos said a significant rise in returns in the U.K. and Europe had hurt net sales.

Boohoo changing its returns policy could be significant. It has many young customers who tend to buy a number of low-priced items and then decide what to keep or send back.


Customers are becoming more selective and more likely to return items. They shop for clothes to wear at special events like weddings and parties, according to Boohoo’s Lyttle. A year earlier, pandemic restrictions meant athleisure was the dominant fashion and the fit was less important, he said.

“In the UK, the returns rate is a big factor,” said Boohoo Chief Financial Officer Neil Catto, speaking in the interview. “And in international, it’s taking us a lot longer to get parcels to customers. Those factors still continue and we’re not expecting those to improve this year.”

Digital Commerce 360 data

40.6% of retailers in Digital Commerce 360’s Europe Database offer free return shipping. Among apparel retailers, 58.1% offer free return shipping. And 37.5% of web-only retailers, offer it. Boohoo falls into these product- and merchant-type categories.


Cost of living bites at Asos, which cuts profit guidance

Asos cut its profit and sales guidance for the full year as the rising cost-of-living crisis weighs on the online retailer.

Asos now expects sales to grow 4% to 7% for the full year. That’s down from previous guidance in January of 10% to 15%, according to a trading update on Thursday. The company expects adjusted pretax profit of £20 million ($24 million) to £60 million. That compares with prior guidance of £110 million  to £140 million.

In April, Asos warned that its full-year earnings goal was at risk from accelerating inflation and disruption from Russia’s war in Ukraine.


The company separately named Jose Antonio Ramos Calamonte as Chief Executive Officer. He is currently chief commercial officer of Asos.

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