Boohoo stock forced into freefall by Omicron: A fast fashion retailer claims sales growth will fall in half

Boohoo has tie-ups with celebrities such as Megan Fox (pictured)

Boohoo is associated with Megan Fox (pictured).

Yesterday’s crash in shares of Boohoo was due to Omicron’s devastating effect on sales. According to the fast-fashion seller, Omicron will reduce its year-end sales growth by half.

It was expecting sales to grow between 20 per cent and 25 per cent for the year but slashed this guidance to between 12 per cent and 14 per cent. Profits would also be affected by the company’s warnings. Shares fell 23.1 percent, or 31.8p to 106.05p. This is the lowest level in five years and will lead to losses of 68% to 2021.

Retail analyst Clive Black of Shore Capital said if Boohoo (which has tie-ups with celebrities such as Megan Fox, whose collection Boohoo x Megan Fox was launched in October) was ‘catching a cold, other retailers will be catching the flu’. He said: ‘Omicron is a seasonal nightmare for any retailer exposed to going-out wear as with so many parties cancelled and gatherings reduced to small numbers it doesn’t need to be bought.

‘It has brought about a real and rapid change in market conditions and is a perfect storm heading into Christmas.’

Currys advised retailers that they were preparing for lower Christmas sales due to fears about the Omicron variant. And last week Wetherspoons boss Tim Martin said pubs would be hit hard by Omicron fears – especially as older customers stayed away.

Boohoo is a company with 19 million customers around the globe. Omicron, Boohoo said, has driven Omicron’s rate of customers returning clothes that they bought to 40%.

Last year, around 25% of shoppers opted for comfortable clothes that they could work in from their home during lockdowns. These are less likely to be too tight.

However, customers began to stock up on Christmas dresses as the lockdowns lifted. Now, it is dealing with the return of workers who have had to cancel their Christmas party at work.

AJ Bell investment director Russ Mould said: ‘Concerns that the Omicron variant is spreading fast do not bode well for the hospitality and leisure sector, and consumers are become more nervous about going out. 

That could be bad for Boohoo’s near-term sales as there would be less of a reason to buy a new dress or shirt if that special night out has turned into yet another session on the sofa with Netflix.’