H&M, Boohoo Warn on Supplies as Business Faces Christmas Crunch
Supply chain snags are hobbling European businesses as rising shipping costs, a growing energy crisis and acute trucker shortages in Britain threaten their ability to meet surging demand heading into the peak shopping season.
Less than three months before Christmas, online retailer Boohoo Group Plc lowered its forecasts for sales and profitability, while Hennes & Mauritz AB reported slowing revenue growth. Both blamed delays in deliveries and the higher cost of moving goods. Boohoo shares plunged as much as 17%.
The challenges facing the U.K. fast-fashion retailer and its rivals reflect the difficulties dogging many European businesses more than 18 months after the coronavirus pandemic took hold. Next Plc, one of Britain’s largest clothing and home retailers, warned earlier this week that consumers may have to wait longer to receive goods this holiday season and could face price inflation next year.
“Whenever you move goods at the moment, it’s just much more expensive,” Boohoo Chief Executive Officer John Lyttle said in a phone interview. The company’s 26 million pounds ($35 million) of shipping costs in the first half -- higher than pre-pandemic levels -- dented its profit outlook, he added.
The squeeze on deliveries has worsened recently as Europe’s economies rebounded following the end of lockdowns, while shipping and air freight capacity remained tight and costly. Logistics is particularly snarled in the U.K., where a severe shortage of truckers is making it harder for businesses to transport goods and keep shelves stocked.
This scarcity of drivers exploded into a national crisis last week when fuel supplies were disrupted and a run on gas stations led to many outlets running dry. Britain has since deployed the government’s reserve tanker fleet to deliver fuel and stabilize the situation. Add in soaring electricity prices across Europe, rising labor costs, and a pandemic which is far from tamed and businesses look set to face a difficult end to the year.
“We can’t meet 100% of the demand from our customers,” Helena Helmersson, CEO of H&M, said on a call. The disruption will “stay with us for a bit,” she added.
At H&M, sales gained slightly in September, slowing from 14% growth in the third quarter. The shares fell 1.3% in Stockholm. The Swedish clothing seller sources the bulk of its clothes from Asia, where bottlenecks are delaying shipments.
Boohoo, whose revenue hit a record in the first half, blamed the cut in its forecasts on shipping snags and wage inflation. It now takes eight to 10 days, rather than five, for the retailer to ship goods to customers in the U.S., affecting demand, said Lyttle.
Simon Wolfson, the CEO of Next, said the post-lockdown bounce in demand it experienced as shoppers returned to stores will “inevitably diminish as time goes on.” Even so, the mainstay of British malls raised its profit forecast for the fourth time.
Boohoo’s Lyttle predicted supply-chain costs will cool off, particularly starting in November when more air travel to the U.S. resumes, boosting air-freight capacity. Wolfson, too, indicated such costs are likely to ease heading into 2022, but he also called on the U.K. government to relax some post-Brexit immigration rules to let more overseas workers into the country to ease the labor shortage.
“For the sake of the wider U.K. economy, we hope that the government will take a more decisive approach to the looming skills crisis in warehouses, restaurants, hotels, care homes and many seasonal industries,” he said on a call Wednesday.
©2021 Bloomberg L.P.