Boohoo makes major US change in bid to broaden appeal

Boohoo has announced significant changes to its operations in the US market as it looks to broaden its product offering across the Atlantic.

The Manchester-headquartered group will stop supplying US customers from its distribution centre in Pennsylvania, as the company’s management look at ways to drive a more sustainable and profitable business.

Orders will instead be fulfilled from the fast-fashion retailer’s automated distribution centre in Sheffield, significantly reducing costs and allowing the firm to market a much wider range of products in the US.

Previously, only 60 per cent of its catalogue was available, which resulted in reduced conversion rates and lower-than-expected order volumes, Boohoo said.

Results from an early trial increasing the product range offered to US customers by also fulfilling orders from the UK have been “encouraging”, the company said.

The company said it would book a write-down against the investments and costs associated with the US operation as well as certain one-off exceptional cash costs.

Latest in a ‘series of steps’ – Boohoo

Analysts at Zeus capital said: “We believe today’s announcement reflects decisive action taken to improve the group’s customer proposition in the US, as well as better leverage its UK operations.”

“Ultimately, this action should drive an improvement in the group’s ongoing cost base over the medium term delivering a more sustainable, profitable business,” analysts added.

The move is the latest in a “series of steps” as part of the strategy to “reposition the group for sustainable, profitable growth”, Boohoo said.

However, the cost of returns could pose a problem, as inventory will be returned to its US centre, according to Zeus analysts.

Boohoo, which own brands including PrettyLittleThing and Nasty Gal, reported bumper profits during the pandemic as customers flocked to buy online and high street shops shut.

However, it has had a torrid time post-Covid, seeing its share price tumble amid supply chain issues, high inflation and tough competition from rivals such as Shein.

It has been investing heavily in automation as a way to lower costs and bump up profitability.

In 2020, a Sunday Times report revealed multiple alleged labour rights violations at its suppliers’ factories in Leicester, highlighting that some workers were paid as little as £3.50 an hour.