When Dallas Pratt worked at an outpost of Aesop in an outdoor shopping mall outside Chicago, one of her and her co-workers’ favourite ways of drawing in new customers was making a concoction they called “sidewalk tea.” They would put a few drops of scented lotion in a cup of hot water, and then they would pour it onto the slab of concrete outside the shop. As the water evaporated, the smell of the lotion would fill the air.

“It drew people in,” Pratt tells me. “They asked questions. They spent time.” And, crucially, they bought stuff.

This isn’t a novel marketing trick: stores that sell items with distinctive smells, such as perfumeries and bakeries, have been pumping smells out into streets and shopping malls probably since the beginning of retail. But starting in the 1990s, sense marketing became a more organised discipline, and now dozens of firms exist to help store owners develop distinctive custom smells.

But sidewalk tea, for Pratt, was also about creating an experience: “It was about hospitality more than ambience.” The salespeople would treat customers as though they were welcoming them into their own living rooms, offering drinks and chatting about things other than the products. The idea was to make people want to be inside Aesop, even if they’d gone to the mall with no intention of buying hand lotion.

As in-person retail continues to recover from the pandemic-era lockdowns, store owners and marketers are working hard to press the main advantage analogue shopping has over digital: its appeal to all the senses.

The most primal sense of all, the one that imprints most deeply on our memories, is smell. The brain processes odours in the olfactory cortex, located directly behind the nose and connected to key structures in the limbic system, including the amygdala, which forms emotional responses, and the hippocampus, which stores memories.

“No other sensory system co-opts the limbic system of the brain the way smell does,” says Rachel Herz, a neuroscientist at Brown University who also advises corporations about their scent strategy. “It’s doing the work of perception, emotion, emotional memory, learning, and association.”

Because smell is so closely linked with memory, not everyone will have the same reaction to a particular scent. While many people find the smell of lavender soothing, for instance, those who connect it to unpleasant memories may feel the opposite. This is another reason brands take the time and trouble to create unique scents that will be connected to them alone.

Aradhna Krishna, a professor of marketing at the University of Michigan, was one of the first researchers to study the intersection between the senses and branding. Two or more senses working in tandem, she discovered, are more powerful than one working alone: a photo of a chocolate chip cookie is nice, but that photo combined with the smell of cookies baking is likely to make you drool.

“Smells within products can enhance the memory of other attributes,” she says. “You remember brand names, what the shape of the product was, where you used it. The smell is uniquely related to the product.”

Even a gentle ambient smell has an effect. In one experiment, Alan Hirsch of the Smell and Taste Research Foundation placed two identical pairs of Nike running shoes in separate rooms that were also identical, except that one was scented and one was not. Customers were 84 percent more likely to buy the shoes in the scented room. (Nike, however, was dubious: “The big thing we try to do is get athletic shoes not to smell,” a spokeswoman told the New York Times at the time. Though it could be argued that new running shoes have an appealing smell all their own.)

Other experiments have shown that customers in pleasant-smelling spaces – not just stores, but also casinos and hotel lobbies – spend more time there without realising it, take more time to examine specific products, and are more likely to spend more money, including on impulse purchases. In some cases, customers are unaware that they’re smelling something that’s been specially designed to appeal to them: “new car smell,” for instance, is entirely artificial and has nothing to do with paint or upholstery.

How does a brand create the ideal signature scent? It’s a lengthy and complex process, says Neohni Gilligan, the director of fragrance and product marketing at ScentAir, one of the world’s largest scent marketing companies. It begins with a 50-100 item questionnaire for the client, though only one or two of those questions relate specifically to scent. The rest are about decor, colours, lighting, sound and music, customer demographics, and the brand’s overall ethos.

Some pairings seem obvious: a furniture shop may want to play up the smell of leather while Cinnabon should smell like fresh cinnamon rolls are baking just a few feet away (at Cinnabon stores, ovens are placed near the doors of the store so that the smell escapes into the street; when the company trialled a location with ovens placed at the back, sales decreased significantly).

Other scents are more about evoking feelings, but while a hotel lobby and a spa can both smell “relaxing”, in practice, these require a very different bouquet of scents.

Once Gilligan outlines the characteristics of a scent, she passes it along to ScentAir’s fragrance partners, who do the actual formulation, taking care to follow local safety guidelines because no smell is more memorable – in a bad way – than the one that caused a severe allergic reaction.

The next step is determining the intensity of the scent. Should the customer be bombarded by fragrance, as they are at Abercrombie & Fitch, which has been blasting its Fierce cologne for more than 20 years, or is the brand going for something more subtle that leaves more of a lingering impression?

“Sometimes,” says Caroline Fabrigas, CEO of Scent Marketing Inc, a scent branding firm, “true success is if the customer doesn’t think it smells of anything. It’s the brand speaking to you.”

Unlike perfumes, whose scents can evolve in conjunction with the wearer’s body chemistry, commercial smells need to remain constant. Scent marketers plan how the smell will be dispersed throughout the space. Sometimes they use the HVAC system, or introduce a visual element such as a candle or a reed diffuser. In the case of Singapore Airlines, the marketing team also incorporated the brand smell into soaps and hot towels. More often, though, spaces use strategically located mechanical diffusers, controlled through smartphones, that can be programmed to pump out scent at different times during the day. My local grocery store, for instance, starts smelling like rotisserie chicken in the afternoon, when shoppers are starting to think about dinner.

The total cost of scent branding varies, based on the size of the space and the complexity of the smell, ranging from $1,000 to many, many times that. Olivia Jezler, founder of the scent marketing firm Future of Smell, says stores spend millions of dollars on visual branding and music, and scent leaves a much more lasting impression than sound.

“At a lot of stores, especially cheaper stores like Zara, we can smell the plastic and the materials in the wall,” she says. “Subconsciously, that’s telling us something: no matter how much money is put into visual branding, this is something uncomfortable, something not safe and not good for us.”

Retail stores are still trying to find their way back from the pandemic, and both Fabrigas and Jezler believe that the next generation of flagship stores will be different from their predecessors. “During the pandemic, people weren’t able to be out in public and they wanted to be,” says Fabrigas. “Retail gives them reasons to come out and play. Stores won’t be just places to buy, they’ll also be places to have this visceral, immersive experience.” Fabrigas already has experience with this sort of space: she designed scents for the Museum of Ice Cream.

The brand experience can extend beyond the confines of a particular space and into the realm of e-commerce. Jezler thinks retailers are missing a huge opportunity by not including scent in their packaging. “Companies are spending a lot of money on beautiful unboxing experiences,” she says. “I ordered something from Chanel the other day, and I thought, ‘The packaging is so beautiful, but where’s the smell?’” It wouldn’t have been hard for the company to embed its signature No 5 scent into the packaging and connect, on an emotional level, to the customer at home.

On Friday afternoon, I went shopping in downtown Chicago, not to buy anything, but simply to smell. Zara on Michigan Avenue didn’t smell like plastic, exactly; more like cardboard and glue, but Jezler was still correct: it smelled temporary, like nothing on the racks had been made to last. At Ralph Lauren, candles in the company’s Green scent were available for purchase. Over on nearby Rush Street, Tommy Bahama reeked of coconut and someone’s idea of the tropics, Urban Outfitters smelled of cardboard mixed with grill smoke from the bar next door, and Abercrombie was Fierce as ever – Herz suggests that it’s been around so long, it’s actually become a nostalgic smell to former customers who are now the parents of teenage shoppers. Meanwhile Garrett Popcorn and Subway pumped their distinctive odours of burned sugar and overly sweet bread on to the sidewalk outside their storefronts,.

On Oak Street, lined with high-end designer boutiques, smells are more subtle, barely there, like “quiet luxury” and money itself; they’re mostly detectable in contrast to unpleasant outside odours like asphalt and car exhaust. At Chanel, this is deliberate: the stronger and more distinctive scents are confined to the area near the cosmetics counter. “We keep smells low to avoid sinus issues for customers and employees,” an employee told me. By contrast, Dior was arranged so that the combined aromas from the first-floor perfume display emanated throughout the entire store.

Armani was also deliberately scentless. A previous location on Michigan Avenue had smelled of Armani’s Bois d’Encens fragrance, said Antony de Angelo, a longtime employee who had worked in both stores. The scent was inspired by the designer’s childhood in Italy, specifically church, and it gave the space an international feel: for Europeans, it was a familiar smell in a faraway place, while for Americans, it evoked foreign travel.

Like Pratt, De Angelo considered the fragrance another way to welcome customers. “The smell was a talking point,” he said. “It was subtle, but people would always comment on it. They could sense it was something out of the ordinary. We don’t have the smell at the new store. I miss it.”

By Aimee Levitt

Sign up to The Business of Beauty newsletter, your complimentary, must-read source for the day’s most important beauty and wellness news and analysis.

For one executive, the clearest sign that Neutrogena had lost its way came when their daughter started buying CeraVe facewash and moisturiser. The family had shelves stocked with Neutrogena products. But the 20-year-old wanted the brand she saw on TikTok, said the employee who has since left the company.

Kenvue Inc., which owns Neutrogena and Aveeno, has seen its skincare market share plummet to less than 14 percent in 2023 from 23 percent in 2019 — when it was the biggest in the US, according to retail data from researcher Circana.

Neutrogena is missing out on what is now a $42 billion US beauty market because it retreated precisely when rivals went all in. What had once been a nimble, innovative company, became slow-moving and cautious, according to four former employees who weren’t authorised to speak publicly on the matter.

Faced with pandemic-induced ingredient shortages, the brand focused on getting core items on shelves and discontinued some customers’ favourite creams and cleansers. Neutrogena pulled back on advertising and innovation, a person familiar with the business said. As customers flocked to TikTok to discuss all things skincare related, the brand was slow to follow them.

Kenvue attributes much of Neutrogena’s troubles to fallout from the pandemic. The company adjusted its strategies to address changes in consumer behavior and navigate supply chain constraints, a spokesperson for the company said in an email. The spokesperson added that investment in marketing was consistent through the pandemic and that Neutrogena has introduced more than 100 new products in the last five years.

“I forget about them, I have to admit. They’re not top of mind,” said Patricia Oyetakin, a dermatologist based near Atlanta. Nine times out of 10, she says, her patients reach for CeraVe or La Roche-Posay. “What makes [Neutrogena] different? They’re a good brand, but I’m not sure why.” Neutrogena lost the title of dermatologists’ No. 1 recommended skincare brand in late 2021; L’Oréal SA’s CeraVe quickly stepped in to take it.

A turnaround plan announced last year that looks a lot like what competitors have put in place years ago hasn’t yielded any concrete results. Skin health and beauty organic sales slumped 4.5 percent in the latest quarter, the company said Tuesday. That marks the third straight quarter of such declines.

Mimicking the playbook of rivals isn’t a bad idea. But that’s the minimum needed just to keep from falling further behind, said Piper Sandler analyst Korinne Wolfmeyer.

For skeptical investors — not to mention fickle Gen-Z consumers who’ve moved on to other brands — it may not be enough to win.

Falling Off the Radar

Neutrogena, founded in 1930 under the name Natone, became a prestige beauty brand in America on its California vibe and dermatologists’ recommendations.

When Johnson & Johnson bought Neutrogena in 1994 for almost $1 billion, the healthcare giant gave the brand greater distribution and deeper pockets for science-centric advertising.  The line of products expanded over the years to include not just soap, but sunscreens, wrinkle cream, acne treatments and lip gloss — fuelling sales gains and garnering a cult-like following among young women. A fresh-faced Jennifer Garner appeared in Neutrogena’s TV spots.

For a while, Neutrogena continued to feel like an independent, family-run brand that was separate from its parent’s corporate influence, said the former employees. Southwest-inspired folk art from Lloyd Cotsen — Neutrogena’s multimillionaire president — hung throughout its Los Angeles office, and a human-sized stuffed cow named Elsie greeted workers and visitors alike inside the entrance.

But as J&J brought Neutrogena more into the corporate fold, former employees said it started to lose its way. As often happens in acquisitions, the brand’s dedicated sales team was tapped to sell products across the parent company’s portfolio. Neutrogena began to fall off the radar of consumers — and physicians — amid rising competition.

One of the product lines that historically distinguished Neutrogena from rivals was sun protection. The brand’s Helioplex sunscreens had strong support among dermatologists focused on skin cancer prevention, one of the employees said. But as consumer concerns arose over the safety of chemical-based sunscreens, CeraVe swooped in with a hydrating mineral-based sunscreen in 2019 that grabbed significant shopper attention. While Neutrogena had its own mineral sunscreen under the Sheer Zinc label at the time, some dermatologists said it was lost in the noise.

Neutrogena’s downfall “started with that mineral sunscreen,” said Amy Brodsky, a dermatologist based in Rockford, Illinois, who has worked with CeraVe on a campaign. “CeraVe kind of beat them to the punch.”

L’Oréal jumped on the opportunity to push its way into dermatologists’ offices. Oyetakin says she’s on a texting basis with her CeraVe sales rep, who comes once a month to drop off samples, whereas Neutrogena’s rep has only visited once this year.

The dermatologist says she used to consider the brand a major player, but the skincare landscape began to shift in late 2020. Consumers and influencers stuck at home on their phones largely shaped the conversation on social media. “CeraVe honestly or just L’Oréal in general seized that opportunity early and they’ve held onto it tightly,” she said.

CeraVe began marketing its products on TikTok in 2020. That year it climbed its way to teen girls’ top skincare brand, where it’s now been ever since, according to Piper Sandler. CeraVe cornered nearly 29 percent of skincare sales dollars across the nation in 2023.

Neutrogena, which didn’t embrace TikTok until 2021, has slipped in the rankings, edged out by not just CeraVe but also The Ordinary, La Roche-Posay, Cetaphil and Glow Recipe.

Neutrogena also pulled back on more traditional advertising. The brand spent just $51 million on national TV ads in 2022, less than half of what it spent in 2020, data from iSpotTV.com shows. And across brands, Kenvue spent $71 million less on research and development in 2020 than it did the year prior. It took three years for R&D spending to surpass its pre-pandemic level.

Meanwhile, competitors ramped up their own new launches. Rival E.l.f. Beauty, noted Piper Sandler’s Wolfmeyer, seems to introduce something new every few weeks, which is key to staying top of mind among teens.

“It’s a new idea to be this launch heavy,” she said.

In the midst of Neutrogena losing both mind and market share, J&J, which also owns Listerine and Tylenol, spun off the consumer-side of its business as Kenvue in an initial public offering last May.

Kenvue’s stock has dropped about 27 percent since then, in part due to lagging sales in skin health and beauty, which makes up about 28 percent of the business. Even as the skincare industry grew sales units by 3.6 percent last year, according to Circana data, sales volumes of Kenvue’s brands fell 4.8 percent in 2023.

“Neutrogena US is a significant part of the business. It’s a high-margin business,” said RBC analyst Nik Modi. “It’s a big deal for investors.”

Too Little, Too Late?

Turning around Kenvue’s skincare business — and specifically the Neutrogena brand — now rests on the shoulders of Jan Meurer, who was promoted to group president of North America from chief growth officer on Jan. 1. So far, the plan he’s tasked with executing has left investors unimpressed.

In a survey of about 60 shareholders, more than half said they were sceptical or not confident that management can turn around its skincare business due to a lack of innovation and rising competition, Modi said in a note published in February.

The company says it’s focussed on making retail displays more visible and easier to shop, and redesigning packaging to better highlight product benefits. Neutrogena is targeting dermatologists with samples and scientific research. Last October, it launched a new line of “Hydro Boost” water creams. All necessary steps, but they haven’t exactly thrust the ailing brand back into the spotlight.

Like its competitors, Neutrogena has enlisted “dermfluencers” and celebs to stump for it. The brand is also trying to build a bridge to Gen-Z in a recent campaign featuring both Garner, now 52, and 21-year-old actress Jenna Ortega.

Kenvue says it will take until the second half of this year, and into 2025, to correct its mistakes — and for sales to pick up.

“Stabilising this business is a key priority for us,” chief executive officer Thibaut Mongon told investors on the company’s first-quarter earnings call. “We are not where we want to be in terms of market-share. The recovery will take time and will not be linear.”

Internally, Meurer is making changes. In April, the company closed the brand’s California headquarters, laying off staff amid a move to New Jersey. In more restructuring, Kenvue is dismissing 51 employees from its Skillman, New Jersey, office this spring in preparation for a move to a new 290,000-square foot headquarters 37 miles north in Summit. And the company announced Tuesday that it’s cutting about 4 percent of its global workforce. Neutrogena is recruiting someone to lead its healthcare professional marketing, and help come up with “science that sells.”

Among certain consumers, it still may be a hard sell.

Thirty-two-year old Alessa Kiyohiro in San Francisco has some 1 million followers across TikTok and Instagram who tune in for her recommendations on skincare and beauty products. She said she was a fan of Neutrogena’s products in her teens but has never mentioned them on her channels.

“Neutrogena is like the one brand that I haven’t really gone back to try to in a long time.”

By Leslie Patton

Sign up to The Business of Beauty newsletter, your complimentary, must-read source for the day’s most important beauty and wellness news and analysis.

Shopify Inc. shares tumbled after the Canadian e-commerce company reported a surprise net loss in the first quarter after the sale of its logistics business last year.

The company posted a loss of $273 million after a profit of $68 million a year earlier. The loss per share was 21 cents on revenue of $1.86 billion, the company said in a statement on Wednesday.

The US-traded shares tumbled 18 percent in premarket trading in New York.

After rallying more than 120 percent last year, Shopify shares have struggled this year after the company had projected higher operating costs than expected for this quarter. The stock, which fell as much as 2.7 percent in US trading on Tuesday, is roughly flat in 2024, lagging the Nasdaq 100 Index.

Shopify is facing an uncertain economic environment and tepid consumer spending, while the sale of its logistics business to Flexport also weighed on financial results. The pace of revenue growth has slowed in the past few quarters to 23 percent in the first three months of this year. That compares with an average of 26 percent over the past four periods. Shopify said it expects second-quarter revenue to grow at a high-teens percentage pace. Gross margins for the second quarter are expected to fall by about 50 basis points.

Shopify has been on a drive to turn around its business as it seeks to reverse a late-pandemic slump. Last year the Ottawa-based company cut more than 2,000 jobs in May, the second culling of employees in 10 months, and sold the majority of its logistics unit to Flexport Inc. Last August, it struck a deal to allow merchants on its platform to use Amazon’s “Buy with Prime” service to deliver packages.

Gross merchandise volume, the overall value of merchant sales across Shopify’s systems, increased 23 percent in the first quarter to $60.9 billion, above Wall Street projections of $59.5 billion.

By Spencer Soper

Learn more:

Shopify Fends Off Temu and Shein as Sales Narrowly Beat Estimates

Shopify Inc. reported sales and profit for the fourth quarter that narrowly beat analysts’ estimates, suggesting the Canadian e-commerce giant fended off competition from Asian shopping platforms like Temu, Shein and TikTok.

Macy’s Inc. is under siege from Arkhouse Management Co. and Brigade Capital Management, which earlier this spring raised their initial bid for the retailer to $6.6 billion.

But the department store chain doesn’t need the activists when it can be its own. New chief executive officer Tony Spring can do much of what an outside investor would. What Macy’s actually needs is not financial engineering — a likely outcome for the company in private hands — but to become a better retailer, a goal that is within Spring’s grasp.

Department stores, such as Macy’s and rival Nordstrom Inc., which is also considering going private, are usually portrayed as dinosaurs, lumbering behind more agile competitors such as Amazon and Inditex SA’s Zara. But that’s not the whole picture.

Macy’s has never been short on ideas. Take One Below, an area dedicated to millennial shoppers that it opened in the basement of its Herald Square flagship in New York City almost a decade ago. Then there was the 2018 acquisition of Story, with its themed displays and product assortments that rotated every month or two, and two years later, a more compact format dubbed Market by Macy’s.

But these innovations never lived up to expectations. One Below has been gone for some time. Two years after buying Story, Macy’s announced the closure of almost half its locations and the project quietly fizzled out. The retailer still operates some Market by Macy’s, but the chain’s new smaller stores, a key tenet of Spring’s approach, are now simply known as Macy’s.

It’s a similar picture when it comes to stores. In February 2020, the company said it would close 125 Macy’s department stores, but shuttered only about 85. Spring’s latest blueprint calls for the closure of an additional 150 Macy’s over the next three years, leaving the chain with about 350 stores. This may still turn out to be too many, but at least it’s a decisive start.

Part of the reason for the stilted progress was that much of former CEO Jeff Gennette’s tenure was spent fighting fires, from playing catch-up in e-commerce to coping with the impact of the pandemic, followed by soaring inflation. Nevertheless, Spring still faces the task of lifting revenues: same store sales at the namesake chain have declined for the past seven quarters.

Spring has a good chance here. Before his appointment as group CEO in February, the seasoned merchant ran Bloomingdale’s, Macy’s Inc.’s more upmarket division, which has outperformed the eponymous brand (as has Bluemercury, the company’s beauty retailer).

To fix the core Macy’s chain, Spring must shrink the brand, delivering the closures effectively and without shedding too many sales in the process. One of the roles of the new smaller stores is to replace the more expensive big box concepts without losing all the old locations’ customers.

Spring also needs to do more with what is left. He wants Macy’s to have inspiring product ranges, in a neat and convenient environment, with enough staff to serve customers, augmented by an effective online offering. This sounds simple enough, but it’s easier said than done. Get it right, though, and the combination can be transformational: Think Brian Cornell’s initial rejuvenation of Target Corp.

But Spring should go further, ensuring that visiting stores feels more like an experience than a shopping trip. Instead of gimmicks like the selfie-spots at One Below, relevant products and events, such as beauty tutorials and fashion styling, would help Macy’s attract younger customers. He should also expand hospitality and dining as a way to draw in shoppers and encourage them to linger, as well as filling excess space.

Not all department stores are doomed. In the US, Dillards Inc. has been more resilient — its shares hit a record high in April —  while the UK’s Selfridges is the model of a luxury emporium.

Of course, a big draw for a bidder is Macy’s real estate, which Mary Ross Gilbert, analyst at Bloomberg Intelligence, estimates could be worth about $8 billion. The company owns over half of its Macy’s and Bloomingdale’s stores, as well as about three quarters of its distribution capacity.

Arkhouse and Brigade have not said what they would do with Macy’s, or its property, but the latter is likely to be tapped in some way. Arkhouse CEO Gavriel Kahane told Bloomberg Television that the company’s real estate was “incredibly valuable” and he hoped to reverse slated store closures. The consortium would also keep Spring at the helm if their bid is successful, Axios reported.

Macy’s said in February that it had raised $2.4 billion from its real estate since 2015. Spring plans to unlock another $600 million to $750 million, primarily from the stores and distribution centers it will close. He could probably go further.

He should avoid a large-scale sale and lease back deal, or splitting Macy’s assets into a property company, from which the remaining operating company would lease them. All this would do is burden the retailer with rents — just another form of debt — tie it into long leases and reduce flexibility.

But he could sell a sliver of stores or distribution centers that Macy’s owns, and then rent them back. This would clearly demonstrate to the market the worth of Macy’s assets, particularly its warehouses.

Spring has some other avenues to create value as well. Part of his plan is leaning into luxury by expanding Bloomingdale’s and the fast-growing Bluemercury.

But concerns are rising about a slowdown in fragrance and cosmetics sales — and the sector is increasingly dominated by the giants, led by LVMH Moet Hennessy Louis Vuitton SE’s Sephora. With beauty valuations high, Spring should consider a sale or spin-off of Bluemercury instead. Oliver Chen, analyst at TD Cowen, estimates that the chain could be worth at least $1 billion.

Spring’s renaissance won’t happen overnight. And of course, in private hands the company could make changes away from the glare of the public markets. After so many false dawns, and no let up in competition, cash upfront in the form of a bid — Macy’s has now opened the books to the consortium — would be appealing to some investors. But a plausible recovery puts Macy’s in a strong position to ask for more than the $24 per share currently on the table.

Macy’s stock is trading at about $19, indicating a level of scepticism that a deal will be reached. And if the bidders do walk away, at least shareholders can console themselves with Spring’s potential for self-help.

By Andrea Felsted

Boohoo has cut more than 1,000 jobs and dived into debt after its losses soared and sales slumped 13 percent amid heavy competition from the Chinese online seller Shein and the revival of the high street after the pandemic lockdowns.

The online fashion specialist, which owns Debenhams, Warehouse, Dorothy Perkins and Pretty Little Thing, said it had built up net debts of £95 million in the year to the end of February – down from almost £6 million of net cash a year before – after losses widened 76 percent to £160 million.

Its chief executive, John Lyttle, blamed the group’s problems on “difficult market conditions, caused by high levels of inflation and weakened consumer demand”, and said it planned to make savings of £125 million in the year ahead after putting more automation into its Sheffield warehouse, closing one in Daventry, and opening a new warehouse in the US.

The latest accounts show that Boohoo, which was founded in Manchester in 2006, had cut more than 1,000 jobs in the year as it faced an 11 percent drop in the number of active customers using its site, each of whom spent less and visited less often.

Boohoo’s share price fell more than 3 percent on Wednesday morning but is less than a tenth of its value three years ago, when it was riding high on a shift to online shopping during the coronavirus pandemic while high streets were affected by government lockdowns.

The poor performance meant the company did not give 16m shares to shareholders of Pretty Little Thing who are led by Umar Kamani, a son of the Boohoo co-founder and chair, Mahmud Kamani.

The 16.1 million share payment, promised under a 2020 deal, was only due if Boohoo’s share price hit 491p by March this year. If they had hit that level, Umar Kamani and his fellow Pretty Little Thing investors would have received about £79 million in stock this year, just ahead of his four-day wedding last weekend on the French Riviera involving performances from Andrea Bocelli and Mariah Carey.

The company said: “While trading conditions have remained challenging due to cost inflation, uncertain consumer demand and normalisation of the channel shift online, the group has a strong business model and clear strategy which it is focused on executing to unlock market share.”

Boohoo and other online sellers experienced a boom in demand during the pandemic, when many households turned to the internet to buy comfy clothing to work and rest at home while many high streets were shut down.

With high streets now reopened, and new competition from cut-price Chinese sellers Shein and Temu as well as secondhand marketplaces such as Vinted and Depop, once successful online fashion specialists have taken a hit.

Lyttle said: “The group is now well positioned to return to growth, and we are focused on ensuring that growth is both sustainable and profitable.”

Guy Lawson-Johns, an equity analyst at Hargreaves Lansdown, said: “Boohoo’s full-year results were a painful read for investors. Revenue declined at high double-digit rates across all regions, including 18 percent in the US, which is seen as the group’s pathway to major growth.

“For now, it remains a struggling company with a tarnished reputation, reflected in the group’s valuation, which has come down significantly over the last few years.”

By Sarah Butler

Learn more:

Boohoo Considers Closing UK Factory Set Up to Improve Workers’ Treatment

The struggling online retailer is consulting with up to 100 workers at the site two years after it was opened to great fanfare with the intention of using it for “supplier learning and development,” creating 170 jobs.