ASOS takes a hit from Omicron as supply chain costs soar

Asos has extended its partnership with Anti-Slavery International
Asos has extended its partnership with Anti-Slavery International
// Asos posts an uplift in Christmas sales across the UK and US, but says supply chain issues drove “heightened clearance activity” over the festive period
// The retailer said underlying pre-tax profits are still expected to be up around 10% to 15% at between £110 million & £140 million

Online fashion giant Asos said it had to fly in clothes to manage supply chain delays and sold more products at a discount as competition heated up over the autumn months in its latest trading update.

The retailer explained it suffered from the spread of the Omicron variant of coronavirus as supply chains were squeezed and revellers stayed indoors.

This morning the company reiterated it had already downgraded its outlook after supply chain constraints and volatile demand limited sales growth in its four months to December 31 trading period.


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Sales in the four months to the end of December rose just 2 per cent to £1.4 billion and profits took a dent as the retailer was forced to discount heavily and spend more on shipping goods to its warehouses.

Rising inflation also meant Asos increased its prices in the “low to mid-single digit” range as costs to the business rose. However, these were not enough to offset the falling profits.

Asos said sales in Europe were particularly hard hit, falling 3% to £390 million, with several countries across the continent imposing strict lockdowns.

This led to fewer sales of dresses and outfits for going out; however, the UK put in a stronger performance where fewer Covid restrictions were imposed.

Sales in the UK rose 13%to £645 million in the four months to the end of December while in the US there was a 7% increase in sales to £172.6 million “despite significant port congestion and supply chain disruption inhibiting our ability to fully service demand”, the company added.

Looking ahead, the retailer said the Omicron Covid variant continues to cause uncertainty, but underlying pre-tax profits are still expected to be up around 10% to 15% at between £110 million and £140 million.

The retailer said its Topshop brand outperformed since it was bought from administrators and is up more than 200% year on year.

“Asos has delivered a robust start to the year, in line with the guidance we set out at full-year results, despite challenging market conditions,” Chief Operating Officer Mat Dunn said.

The retailer was hit by a difficult end to 2021, when it cut its annual profit forecast and parted ways with its CEO following supply chain pressures and a return by shoppers to pre-pandemic ways.

While shoppers often return partywear clothing and fashion, incurring a cost for the company, they retained the athleisure wear bought during the pandemic to use at home, giving the company a boost to its finances during lockdowns.

Its shares are down 56% this year, prior to Thursday’s update, mirroring similar falls seen at rival retailer Boohoo which has also been hit by high product return rates, disruption to international deliveries and inbound freight costs.

Separately, Asos announced plans to leave the junior AIM London Stock Exchange and join the FTSE main market next month.

Dunn said: “We continued to make progress against our objectives to improve the flexibility and speed of our retail model and accelerate the pace of delivery of our international growth strategy.

“Looking ahead, while mindful of the near-term uncertainty relating to the pandemic, our guidance for the full year remains unchanged.”

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