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Significant investment 'disrupts' Asos profits

Profit before tax at Asos dropped by 68% year on year to £33.1m in the year to 31 August, following “significant” investment in its warehousing and sustainability credentials. 

Asos CEO Nick Beighton said the large decrease was due to “significant” investment during the period, which was “regrettably more disruptive” than the etailer anticipated. Investments included the launch and expansion of two new warehouses in the US and Germany and greater investment in sustainability, customer acquisition and customer retention.

However, gross profit increased by 8% to £1.3bn during the period. Turnover also rose by 13% to £2.7bn in the year. UK sales grew by 15%, those in the European Union were up by 12% and sales in the US increased by 9%. 

Net debt at the end of the period was £90.5m, reflecting ”elevated capex investment in support of the global logistics platform”. The business had net cash of £42.7m in 2018. 

It comes after Drapers revealed in August that Asos had asked suppliers for a 3% discount on all invoices for stock received from 1 September onwards, to continue to “fuel joint growth” at the business and the brands it stocks. 

“This financial year was a pivotal period for Asos, where we have invested significantly and enhanced our global platform capability to drive our future growth”, Beighton commented: ”Regrettably this was more disruptive than we originally anticipated. However, having identified the root causes of our operational issues, we have made substantial progress over the last few months in resolving them. Whilst there remains lots of work to be done to get the business back on track, we are now in a more positive position to start the new financial year.

”Our focus now shifts to ensuring that we enhance our capability to drive an improved customer experience and leverage the benefits from the investments we have made. With over 60% of our revenue coming from international customers and a strong global logistics platform with capacity to grow, we are well positioned to take advantage of the global growth opportunity ahead of us.”

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