Boohoo Group's Bold Marketing Move: Weathering Short-Term Challenges and Safeguarding Brands
Boohoo Group remains committed to its brand's long-term health, doubling down on marketing despite a projected revenue decline of 12-17% for its 2024 fiscal year 'Backing winners' is their strategy for success
The Boohoo Group, the proud owner of renowned brands such as Karen Millen, Pretty Little Thing, and Debenhams, firmly believes that marketing is essential to the prosperity of its business. Despite recently revising its forecast for the year, the company is unwavering in its commitment to ongoing investment. During a discussion with investors on October 3rd, CEO John Lyttle emphasized the company's dedication to investing in agility, speed, competitive pricing, and marketing. These investments may result in short-term challenges; however, they are crucial in safeguarding our brands and positioning them for future growth opportunities.
Amidst significant revenue declines in the six months leading up to August, the company has revisited its projections for the year and made a firm commitment. In the first half, revenue dropped by 17% compared to the same period last year. Previously, Boohoo Group anticipated a full-year revenue decline ranging from flat to 5% year over year. However, the company now predicts a decline of 12% to 17% in its 2024 financial year.
You’ll find it no surprise to hear that marketing remains absolutely vital to the success of our business.
Shaun McCabe, Boohoo Group
Lyttle emphasized that despite the lower expectations for the near future, investing in marketing is crucial for the long-term well-being of the business. Chief Financial Officer Shaun McCabe stated that the purpose of this investment is to guarantee that the group's brands and business can make a robust comeback once growth resumes.
Marketing continues to play a crucial role in the success of our business," he confirmed, emphasizing our focus on strategic investments in growth opportunities and brand activation campaigns.
The marketing budget increased by 170 basis points as a percentage of sales during the first half, compared to the previous year. The total marketing expenditure for the half was £90m, representing a 4% decrease from the corresponding period in 2022.
The fast fashion retailer is also focusing on price as it aims to regain growth. With the decrease in raw materials and input costs, it intends to utilize these savings to offer lower prices.
"We have full confidence that prioritizing price will increase sales volume," stated Lyttle.
The company claimed that, on average, prices in the apparel industry have risen by 8% compared to last year. Meanwhile, within the Boohoo Group, prices have decreased by 1% compared to last year, according to the company. Additionally, Lyttle noted that the company has emphasized the expansion of its entry point ranges across its brands.
‘Backing winners’
As a fashion retailer, Boohoo Group must react to trends to meet the demands of its target consumer.
According to GlobalData apparel analyst Louise Deglise-Favre, Boohoo's fast fashion brands have faced difficulties in keeping pace with Chinese competitor Shein's rapid growth. Deglise-Favre noted that Shein's agility, coupled with unbeatable low prices and ability to stay on top of ever-emerging micro-trends on social media, is unmatched by Boohoo.
Boohoo's CEO, Lyttle, emphasized the company's commitment to adaptability and satisfying customer needs. He stated, "Our main focus is on supporting successful products, efficiently recognizing those that gain popularity with customers and placing repeat orders throughout the season to optimize their profitability."
The company's flagship brands, such as Boohoo, Karen Millen, and Pretty Little Thing, exhibited superior performance compared to the rest of the business. These brands experienced a 10% decrease in revenue during the half.
According to Deglise-Favre from GlobalData, this suggests that the group's more recently acquired brands, namely Wallis and Dorothy Perkins, are negatively impacting the overall performance.
"This consolidation of brands still grapple with their lackluster brand images from before their acquisitions, and Boohoo Group has yet to find success in revitalizing their identities, thus missing out on the potential to attract a broader range of customers across different age groups," she explained.
Lyttle suggested that these smaller brands could be regarded as "labels" that predominantly fall under the Debenhams brand. The company highlighted that if these labels prove successful, there is potential to expand their presence.
