Fashion firm Asos issues profits warning

?Online fashion giant Asos has warned that profits will be lower than anticipated following problems at two of its warehouses.

Asos said warehouse problemshave hitsales in Europe and the US
Asos said warehouse problemshave hitsales in Europe and the US

Total sales in the four months to June 30 rose 12 per cent, but the warehouse problems have hit sales in Europe and the US.

Asos chief executive Nick Beighton said profits will now be between £30m and £35m - compared with pre-tax profits of £102m last year - and admitted ambitious targets at its Atlanta and Berlin warehouses would be missed. Asos has its main warehouse in Barnsley.

"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," he 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."

He said the firm is clear on the root causes of the operational challenges and it is making progress on resolving them, and now expects 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," he added.

Analyst Greg Lawless at Shore Capital said: "This is the second profit warning from the company after the first one back in mid-December 2018.

"Initially sales guidance was for around 25 per cent growth in 2019 – that has now been halved in the space of six months.

"The UK performance is relatively robust, but clearly the warehouse transition in both Europe and the US have seen significant growing pains in recent months, which in our view, have been self-inflicted by the company. The new guidance is significantly lower than the previously issued guidance."

Analyst Nicholas Hyett at Hargreaves Lansdown added: “Asos can be a bit of a Cinderella stock, struggling against the odds and still making it to the ball in the end.

"Growing pains have been a consistent problem at Asos over some years, and this quarter is no exception. Not having stock available is a massive faux pas for a retailer, and the cost of resolving the problems will eat into profits.

"Having said that both the US and EU businesses have managed to deliver sales growth despite the operational headwinds. If, as expected, Asos can resolve its stock issues by the autumn then this could be just another operational blip in the Asos timeline. We don’t think Asos should be written off just yet.”

Asos said the roll out 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, Asos blamed outside companies for failing to get stock to its warehouse quickly enough.

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.