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‘Self-inflicted’ warehousing and stock problems see Asos profits plunge

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Asos has issues a new profits warning – the third in eight months – suggesting profits for the year could be as much as 46% down after sales stall and problems with new warehousing and distribution hit it hard.

The group saw total sales up by 12% to £919.8 million in the four months to June 30, with sales in the UK and the rest of world division up 16% and 14% respectively. However, EU and US sales were held back – up 5% and 12% respectively – by operational problems associated with the roll out of its new warehouses in Berlin and Atlanta.

As a result. Asos expects pre-tax profits to be between £30 million and £35 million in 2019. It also flagged £47m in transition costs and £3.5m in restructuring costs. Analysts had forecast earnings of £55.7 million.

ASOS’s shares have fallen 55% over the last year.

Sales in the UK and RoW are continuing to be strong, said the company, however, ambitious plans for new warehousing and stock control have not worked as planned.  In Berlin, the retailer has struggled with new automation software, which has been unable to deal with the volume of stock it is being expected to process, while in Atlanta the group has struggled to build up stock.

“This has restricted product availability and range for our customers in these territories and we have seen a corresponding impact on sales as well as additional costs in support of transition,” Asos said.

And these issues with stock are likely to continue to hit performance across the year, analysts predict.

“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,” chief executive Nick Beighton said.

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