The online retailer Asos warns of delivery bottlenecks and falling profit margins.
(Photo: Bloomberg)
London Online fashion retailers were among the big winners of the corona pandemic. During the lockdowns, they were one of the few opportunities for shoppers to spend money. Now, however, the corona boom seems to be over for the time being: consumer pleasure is declining, rising wages and freight costs are depressing profit margins.
British fashion retailer Asos warned on Monday that pre-tax profits could fall by more than a third in the current fiscal year. The company gave the supply chain problems as a result of Corona and Brexit as reasons. The acute labor shortage in the kingdom means that hourly wages for warehouse workers have risen by 20 percent to twelve pounds (a good 14 euros). The share price fell 16 percent on Monday.
Asos is not alone with the profit warning. Two weeks ago, British rival Boohoo announced that profit margins would fall due to higher purchasing and personnel costs. The German online retailer Zalando had also reported a decline in profits for the second quarter.
Asos also announced a far-reaching management reorganization. CEO Nick Beighton is leaving the company with immediate effect after six years in office. According to the company, he did not want to commit to another five years to implement the international expansion strategy. From the point of view of observers, however, the exit has to do with the disappointing balance sheet this year.
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CFO Matthew Dunn will run the business on an interim basis until a successor is found for the executive position. In addition, the company is getting a new chairman in the form of the former Marks and Spencer manager Ian Dyson.
Interim boss Dunn wants to increase sales significantly
For the fiscal year ending August, Asos reported a pre-tax profit of 177 million pounds, the equivalent of around 209 million euros – an increase of 25 percent compared to the same period last year. However, the result was well below the analysts’ expectations. For the current fiscal year, Asos lowered its profit forecast to 110 to 140 million pounds.
Sales rose by a fifth to £ 3.9 billion. The acquisition of the Topshop and Miss Selfridge brands from the insolvent Arcadia Group in February contributed to growth. In the next three to four years, interim boss Dunn wants to increase sales to seven billion pounds. This is to be achieved primarily by gaining new customers in the USA and Europe. The company currently has 26 million customers in 200 countries.
Dunn warned of delivery bottlenecks in the Christmas season, traditionally the busiest time in retail. The offer at some brands will be “lower than we’d like,” he said. The pressure on global supply chains is greatest in the period between Christmas and the Chinese New Year celebrations in February.
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