Boohoo to shut US distribution centre

11th Sep 2024 07:42

(Sharecast News) - Boohoo Group is to cease using its US distribution centre, the fast fashion retailer confirmed on Wednesday, just a year after it first opened.

The warehouse in Elizabethtown, Pennsylvania, began operations in August 2023. Boohoo's first US distribution centre, it allowed the retailer to supply customers directly for the first time, rather than from the UK.

At the time, chief executive John Lyttle called it "a complete gamechanger".

But on Wednesday Boohoo confirmed it was to stop using the warehouse, with orders once again being fulfilled in the UK.

Explaining its decision, the Aim-listed firm said that by transferring distribution back to its Sheffield hub, it would be able to offer US shoppers its full range.

Currently Americans are able to buy around 60% of styles on sale in the UK. A recent trial to increase the product range had been "encouraging", Boohoo noted.

It also wants to expand routes to market, following the launch of its Nasty Gal brand in Nordstrom stores.

It continued: "These moves are the latest in a series of steps as part of the strategy to reposition the group for sustainable, profitable growth."

Shore Capital, which has a 'hold' rating on the stock, said: "We have previously noted the group's struggle to gain traction in the US, despite investing to grow market share and improve delivery times.

"To us, the short life of the US warehouse - previously stated as a key pillar of growth for Boohoo - is concerning, highlighting a naivety of the American market, along with a waste of time and resources."

The decision will result in an as yet unspecified write-down on the investment, as well as some one-off exceptional cash costs, although Boohoo said that over the medium term, ongoing costs would be cut "significantly" as a result.

Full details of the financial impact are expected at the half-year results in October.

The centre has already been sublet, with all Boohoo operations due to end by 11 November.

As at 1015 BST, shares in Boohoo were down 2% at 27.99p.