Boohoo Weighs Break-Up as Sales Plunge Amid Stiff Competition and Changing Consumer Trends
Online fashion retailer Boohoo is considering a significant overhaul that could lead to the break-up of the company, as it struggles to regain its footing in an increasingly competitive market. The British fashion firm, known for its portfolio of brands including Debenhams, Karen Millen, and PrettyLittleThing, has initiated a strategic review of its operations, citing that its business remains “fundamentally undervalued.”
Boohoo thrived during the pandemic as consumers flocked to online shopping, but the company has since faced difficulties competing with fast-fashion giants like China’s Shein and Temu. As a result, Boohoo is exploring the possibility of selling off some of its brands, with analysts predicting that Debenhams and Karen Millen may be the first to go. This would allow the company to narrow its focus on a younger, more digitally native market.
Russ Mould, investment director at AJ Bell, remarked, “The starting gun has been fired on the break-up of Boohoo. Selling Karen Millen and Debenhams is the obvious starting point, leaving Boohoo with a sharper focus on a younger target market.”
Retail analyst Catherine Shuttleworth echoed similar sentiments, noting that fast-fashion companies are under increasing pressure due to changing consumer preferences. “Shoppers are thinking more sustainably and making different choices,” she said.
Boohoo had acquired Karen Millen for £18.2 million in 2019 and took on the struggling department store chain Debenhams for £55 million in 2021, converting both into online-only platforms. However, these acquisitions have not delivered the impact the company had hoped for, particularly as shoppers shift their attention to sustainability and new alternatives.
The company also acknowledged that some of its core youth-focused brands, including boohoo.com, boohooMAN, and PrettyLittleThing, have faced performance challenges. Boohoo remains optimistic, however, stating that it expects a recovery in the second half of its financial year.
In a further shake-up, Boohoo’s chief executive, John Lyttle, is set to depart after six years at the helm. Lyttle, who joined from Primark, had made efforts to steer the company away from its fast-fashion image, positioning Boohoo as a more sustainable player. However, the retailer has faced a series of controversies, including a BBC Panorama investigation in 2023 that revealed unethical practices within its supply chain.
The investigation showed that Boohoo had pressured suppliers to reduce prices, even after deals had been struck. Additionally, earlier this year, Boohoo faced scrutiny for mislabelling some of its garments, falsely claiming they were made in the UK when they were, in fact, produced in South Asia. The company described the incident as an isolated misunderstanding of labelling rules.
Despite these efforts to rectify its image, Boohoo’s financial performance has continued to slide. For the six months ending in August, the company reported a 15% drop in sales to £620 million, with declines seen in the UK, the US, and other international markets.
Shuttleworth pointed out that Boohoo’s core demographic has matured, with the younger generation turning to in-store shopping and exploring alternative brands. “The generation behind is enjoying in-store shopping and looking at alternative brands for inspiration,” she said, further emphasising the challenges Boohoo faces in keeping its offerings relevant in an evolving retail landscape.
As Boohoo contemplates the next phase of its business, the potential break-up could mark a pivotal moment in its bid to recover and adapt to the demands of a changing fashion market.
