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Boohoo Group (LSE:BOO) announced on Wednesday that it will discontinue operations at its US distribution centre in Elizabethtown, Pennsylvania, less than a year after it first began functioning. The warehouse, which opened in August 2023, was Boohoo's inaugural US distribution facility, marking the retailer’s first effort to supply American customers directly from within the US, rather than shipping from the UK.
At the time of its opening, CEO John Lyttle described the facility as “a complete gamechanger” for the company. However, Boohoo has now decided to close the warehouse and resume fulfilling orders from its UK-based hub in Sheffield. This move is intended to enable the retailer to offer a wider range of products to US shoppers. Currently, American customers can access approximately 60% of the styles available in the UK. Boohoo mentioned that a recent trial aimed at expanding this range had shown promising results.
The company also plans to enhance its market presence through additional channels, such as the recent launch of its Nasty Gal brand in Nordstrom stores. These changes are part of a broader strategy to reposition the company for sustainable and profitable growth.
Shore Capital, which maintains a ‘hold’ rating on Boohoo's stock, expressed concerns about the brief operational period of the US warehouse. The firm noted that despite efforts to expand market share and improve delivery times in the US, the short-lived operation of the warehouse reflects a misjudgment of the American market and represents a significant waste of resources.
The closure of the distribution centre will lead to an undisclosed write-down on the investment and some one-time exceptional cash expenses. However, Boohoo anticipates that ongoing costs will be significantly reduced as a result of this decision. Full financial details regarding the impact of the closure are expected to be disclosed in the company's half-year results scheduled for October.
The US distribution centre has already been sublet, with all Boohoo operations set to conclude by November 11. Following the announcement, Boohoo's shares were down 2% at 27.99p as of 10:15 BST.
