Asos issues another profit warning despite third quarter growth

Asos profit warning
// Asos’ latest quarterly trading update includes a third profit warning in eight months
// It blames “operational issues” with its new warehouse roll-out, especially on the EU and the US
// Total sales in the four months to June 30 were up 11% year-on-year

Asos’ latest quarterly trading update released today includes another profit warning – the online retailer’s third in eight months.

The retail giant said it expected full-year profits to be lower than anticipated, between £30 million and £35 million.

This is much lower than Asos’ reported profit of £102 million in its last financial year, and also lower than analysts’ expectations of £55 million in pre-tax profit according to Refinitiv data.

The online retailer blamed the profit warning on operational issues as it overhauls its warehouses in the US and mainland Europe, and chief executive Nick Beighton admitted ambitious targets at its Atlanta and Berlin warehouses would be missed.

It also booked £47 million of transition costs and £3.5 million of restructuring costs.

Meanwhile, total group revenue in the four months to June 30 grew 12 per cent year-on-year from £919.8 million, and total retail sales grew 11 per cent from £802.7 million to £894 million.

Asos’ UK market was the star performer, with sales in its home country growing 16 per cent year-on-year from £288 million to £334 million during the period.

In comparison, Asos’ total international sales for the same period grew nine per cent, from £514.7 million to £559.9 million.

Asos said sales in mainland Europe and the US were held back by the warehouse transformation, growing five per cent and 12 per cent respectively.

However, it said quarterly sales from its Rest of World markets were “robust”, growing 14 per cent year-on-year.

For the balance of the year, the online giant forecast sales broadly in line with its year to date performance.

“Whilst we are making good progress in improving customer engagement, our recent performance in the EU and US was held back by operational issues associated with our transformational warehouse programmes,” Beighton said.

“Embedding the change from the major overhaul of infrastructure and technology in our US and European warehouses has taken longer than we had anticipated, impacting our stock availability, sales and cost base in these regions.

“Where we have been unencumbered by these issues we have seen robust growth and overall our customer momentum is improving with the business hitting 20 million active customers globally for the first time.

“We are clear on the root causes of the operational challenges we have had, are making progress on resolving them, and now expect to complete these projects by the end of September.

“Despite these short-term challenges, the move to a multi-site logistics infrastructure will enable us to offer customers across the world our market leading proposition, facilitate our future growth, as well as leading to longer-term efficiency benefits.”

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