Asos warns on profits over warehouse problems

Asos warns on profits over warehouse problems

Fashion giant Asos has admitted problems at two of its warehouses will hit profits harder than first thought.

Bosses at the business said getting its Berlin and Atlanta factories up to full speed is proving difficult and pre-tax profits will be less than expected, between £30 million (€33m) and £35 million (€39m).

The unexpected news sent shares in the retailer down 12% to 2,429p in early trading. Twelve months ago, shares were trading at 6,170p, meaning more than £3 billion (€3.3bn) has been wiped off Asos’s value in a year.

Chief executive Nick Beighton said: “Embedding the changes from the major overhaul of infrastructures 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.”

It means sales grew by 12% during the four months to June 30, but this was held back by EU sales up just 5% and US sales up 12%. By comparison, UK sales grew 16%.

Nick Beighton (Asos/PA)
Nick Beighton (Asos/PA)

Bosses said the rollout of new technology and software in its German and US warehouses had fallen “behind our ambitious expectations”.

In particular, automation software in the Berlin hub had been problematic, particularly with ramping up production.

At the Atlanta factory, bosses blamed outside companies for failing to get stock to its warehouse quick enough.

They said: “Third-party brands providing product to the US for the first time proved slower to resolve US-specific compliance issues than we had anticipated, and we have not yet received the width of range from some of our more established brand partners.”

The company insisted it is clear on the “root causes” of the problems and will fix them, including hiring more staff with global business skills.

Investors and analysts suggested Asos needs to avoid losing the trust of its customer base, who are ever-more demanding.

Russ Mould, investment director at AJ Bell, said: “Fashion fans have plenty of places from which to buy clothes and so Asos is at risk of losing out to the competition if it cannot fix its problems fast.

“We live in an impatient world where so many people want something in an instant. If Asos doesn’t have the stock ready to ship then consumers will simply go elsewhere.

“Operational issues are also bad for its reputation as consumers lose trust in a brand if they cannot get what they want, when they want.”

Retail analysts at Liberum said: “The operational issues in Europe and the US signal to us a lack of enough senior leaders in the business with the adequate skill-set in the business to undertake the complex capital projects ongoing.”

Independent retail analyst Nick Bubb pointed out that younger rival Boohoo is now worth more than Asos based on Thursday’s share price.

- Press Association

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