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LONDON, Dec 16 (Reuters Breakingviews) – Boohoo (BOOH.L) investors got a fright on Thursday. The 2 billion pound online polyester palace and owner of the Nasty Gal brand slashed its net sales growth forecast to between 12% and 14% for the year ending in February, compared to 20% to 25% previously. It also now expects an adjusted EBITDA margin of 6% to 7%, compared to previous guidance of around 9%. Shares fell 20%.

The reasons are mixed. Higher freight costs should be temporary. But subdued enthusiasm from fashionistas outside its domestic UK market and more customers returning clothes than before the pandemic are weightier problems. It now trades at 15 times 2022 earnings, a 32% discount to more mature rival Asos (ASOS.L).

A revenue and profitability warning this late in the year also tarnishes management’s credibility just as the company emerges from a scandal over working conditions at its suppliers read more . Boohoo’s low-cost business model risks coming apart at the seams. (By Dasha Afanasieva)

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