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Boohoo, H&M Warn Supply Chain Issues Are Hitting European Retail

High shipping costs and global supply chain disruptions are starting to challenge European clothing retailers.
air cargo, air plane, supply chain
Freight cargo. Shutterstock.

Boohoo Group Plc lowered its forecast for sales and profitability while Hennes & Mauritz AB’s revenue growth decelerated as high shipping costs and global supply chain disruption start to challenge European clothing retailers.

Boohoo shares slumped as much as 17 percent after the UK company said full-year sales growth may come in below its previous estimate of 25 percent and cut its margin target. H&M said sales decelerated in September as product delays prevented it from keeping up with consumer demand.

The supply chain effects have been magnified for the retailers as demand rises post-lockdown but capacity in shipping and air freight remains tight and costly. The slowdown in Boohoo’s growth comes after revenue had jumped nearly a third in the first quarter.

H&M said sales gained only slightly in September, decelerating from 14 percent growth in the third quarter. The Swedish retailer’s shares rose in morning trading, helped by the company’s announcement it’s reinstating a dividend payment this year.

Boohoo blamed its worsening prospects on 26 million pounds ($35 million) of shipping costs in its first half, as well as inflation in labor costs. H&M sources the bulk of its clothes from Asia, where bottlenecks are delaying shipments.

Boohoo said Thursday it expects its adjusted margin for earnings before interest, taxes, depreciation and amortisation to be between 9 percent and 9.5 percent, compared with a previous range of 9.5 percent to 10 percent.

Boohoo has grown rapidly in the last few years, expanding both organically and through buying rivals, most recently brands from the failed Arcadia Group. In the past year the retailer has also begun a comprehensive review of its governance following a scathing independent review of its operations after a labor scandal at a supplier factory.

Boohoo said Thursday that its medium-term growth plans are on track despite the disruptions caused by the pandemic. The fast-fashion site has doubled market share in the UK and US over the last two years. During the first half to Aug. 31, it also had record sales of 976 million pounds.

Sales in August and September are also picking up and current trading is seeing a rebound. The end of lockdowns in many markets means more of Boohoo’s core younger customers are buying outfits for visits to pubs, clubs and restaurants.

By Deirdre Hipwell and Thomas Mulier

Learn more:

How Fashion Can Tackle Its Supply Chain Crisis

Between factory lockdowns and a shipping crunch, the pandemic is making it difficult for brands to take advantage of surging demand. BoF spoke with experts about how to make the best of a bad situation.

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