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Asos profit drop blamed on warehouse troubles

Online giant Asos has warned full-year profit before tax will be lower than expected after sales in Europe and the US were hit by teething troubles as the retailer overhauled its warehouses.

Profit before tax is now expected to fall between £30m-£35m, down from expectations of £35m, as a result of £47m in transition costs. It expects retail gross margin to fall by 250 basis points. Capex guidance for the full year is unchanged at £200m. 

Total sales at Asos were up by 12% on a reported basis and 11% on a constant currency basis in the four months to 30 June. Sales in the UK grew by 16% and the rest of the world by 14%.

However, sales in Europe were up by just 5% and in the US by 12%.

The retailer said new automation software in its European warehouse hub had been hit by challenges as more and more stock was processed through the system. Disrupted interaction between automation and warehouse software affected the retailer’s efficiency, which impacted availability.

In the US, sales growth was held back by slower than planned build up of stock at Asos’s Atlanta warehouse. Third-party brands providing their product in the US for the first time were also hit by compliance issues, which meant the retailer was not able to offer the full breadth of products from some of its most ‘established’ brand partners.

CEO Nick Beighton said: “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. 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 20m 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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