Asos profits plummet 87% after difficult year

Margins squeezed by high level of discounting and promotional activity across the market

(PA)

Asos has seen half-year profits tumble due to expansion costs and heavy discounting.

The online retailer saw pre-tax profits crash 87 per cent to £4m, which it blamed on “temporary transition costs” linked to its warehouses in Europe and Atlanta.

In the US, Asos was hit by staffing issues, resulting in a backlog of orders, while in Europe the group is automating its warehouse in Berlin.

Sales grew 14 per cent, or 12 per cent at constant currency, to £1.3bn in the six months to 28 February.

UK sales rose by 16 per cent and international sales by 12 per cent.

But the firm bemoaned a “disappointing” set of figures, pointing to the cost of adding new warehouse capacity and a high level of discounting and promotional activity across the market.

Boss Nick Beighton said: “We have identified a number of things we can do better and are taking action accordingly. We are confident of an improved performance in the second half and are not changing our guidance for the year.

“We are nearing the end of a major capex (capital expenditure) programme.

“Whilst this has inevitably involved significant disruption and transition costs, the global capability it now provides us gives us increased confidence in our ability to continue to capture market share whilst restoring profitability and accelerating free cash flow generation.”

In December, the company warned that profits were likely to be lower than expected due to a significant deterioration in trading during the lead-up to Christmas.

The announcement indicated that the company was not immune from the cyclical slowdown, caused in part by the disruptive effect of Black Friday on the usual retail calendar.

Shares were up nearly 15 per cent in morning trading at 3,600p.

PA