Boohoo Group PLC (AIM:BOO) said revenue dropped 8% in the three months to the end of May as inflation impacted costs in "its supply chain and international competitive proposition."
Nevertheless, the online retailer stuck to its outlook for the year ending 28 February 2023 and said revenue growth for FY23 is expected be low-single digits, with a return to growth in Q2 and growth rates improving in the second half.
Adjusted EBITDA margins are expected to be between 4% and 7%, in line with prior guidance.
Revenue for the three months fell to £445.7mln, compared to the equivalent part of the prior financial year when it said Covid-19 lockdowns boosted sales.
But revenue was up 75% over the comparable period of fiscal 2020.
Boohoo’s proceeds fell 26% in the US market to £95mln during the three months of trading but were relatively flat in the UK, dipping just 1% compared to the equivalent part of last year to £272.1mln.
The online retailer lost 7% of revenue elsewhere in Europe, growing its sales in the rest of the world by 15% to £29mln.
It posted a gross margin of 52.8% for the first three months of the current fiscal year, down 220 basis points compared to the comparable period last year.
Boohoo said it continued to increase sourcing from near-shore markets to limit freight costs, achieving a “10 percentage point increase in short-lead time product mix”.
It also signed a lease for a new distribution centre in Pennsylvania due to go live in mid-2023 and expects to open an automated factory in Sheffield in the second half of the year.
The group anticipates an improvement in the rate of growth in the second half of the year as consumer demand normalises, on an adjusted earnings margin of 4-7% in line with prior guidance.
Boohoo chief executive John Lyttle said: "We have seen promising signs from the group's sales performance in the UK, which has improved month-on-month in the period and we are looking ahead towards our key summer trading season as holidays ramp up and customers look to the latest fashion from across our brands."
Broker Liberum has a "hold" recommendation on the shares and said yesterday it would need to invest in clearing excess stock to achieve its growth plans this year.
Shares were down 14% at 55.76p in early deals.