What's going on here?
On Tuesday, British accessible luxury brand Ted Baker’s stock fell by 2% after reporting revenue growth of 4% compared to the same period last year. Meanwhile, online fashion retailer Boohoo.com’s stock also fell by 1% despite growing its sales by 52% (tweet this) more than the same quarter last year. Hmm.
What does this mean?
Boohoo.com’s biggest brand (creatively named boohoo) grew its sales by 12% last quarter – a big slowdown from last year’s growth rate of 30%. This may have sparked investors’ concern since boohoo had also lowered its prices to encourage customers to buy. The company’s smaller brands – including Nasty Gal (of Netflix notoriety)– more than picked up the slack, growing by over 150% compared to last year.
Elsewhere, Ted Baker showed its flexibility to investors: while its direct sales to consumers grew by just 1% versus last year, its sales of items in bulk to other retailers (a.k.a. wholesale) looked much healthier, growing by 14%.
Why should I care?
For markets: Both companies’ stocks were out of fashion on Tuesday.
Boohoo.com’s investors may have sold the stock thinking that the cost of reinvigorating growth in its biggest brand might hurt future profits for the business – and costs are already rising for things like warehouse automation, which gets packages to customers faster. Ted Baker’s ability to grow one part of its business when the other’s stagnating wasn’t enough to keep investors from selling its shares on Tuesday.
The bigger picture: Ecommerce is tough for the big players, too.
It’s no $7 billion giant like rival ASOS but at a $3 billion valuation, Boohoo.com is still a force to be reckoned with. It’s expanded across Europe and into the US by reaching young consumers on social media and through partnerships with sports stars. Traditional retailers are incorporating tech into their businesses to keep up with the ecommerce charge, perhaps making it tougher for relative newbies to grow as quickly as in the past.