Online fashion retailer Asos expects a £14m drop in profit and a 2% reduction in growth, following its decision to halt its business operations in Russia in response to the invasion of Ukraine by Moscow.
The forecast came as the company recorded a pre-tax loss of £15.8million in the six months to the end of February, compared with a profit of £106.4million a year earlier, as She was among internet retailers benefiting from the e-commerce lockdown boom as shoppers stocked up on leisurewear while stuck at home.
Sales in the UK rose 8% to £895.5 million over the period, and 11% in the US. However, Asos said the supply chain disruption had led to reduced availability of some products and prevented it from selling some of its new ranges.
The online retailer’s share price rose more than 5% at midday on Tuesday after its half-year results were announced, to around £16.20. A year ago, its shares were trading at over £50.
Asos said sales were boosted by the addition of Topshop brands to its website, particularly in the UK, US and Germany. The retailer acquired Topshop, along with brands Topman, Miss Selfridge and sportswear range HIIT, in early 2021 following the collapse of Sir Philip Green’s retail empire in the first year of the pandemic.
However, he issued a note of caution in his outlook for the rest of the year as buyers are expected to cut spending amid rising inflation and a slump in the cost of living.
Asos said it had not yet seen an impact on consumer behavior or spending, but predicted that could change in the coming months as shoppers face higher energy bills and tax increases.
Asos, which has not had a full-time chief executive since Nick Beighton left last October, said it had bought more spring and summer clothes in advance, to try to make up for the longer shipping times, which had resulted in some products arriving a month later than expected.
Mat Dunn, chief operating officer and chief financial officer of Asos, who leads the company as it searches for a new boss, said the company has reported rising costs throughout its supply chain .
“We’ve seen it in warehouse wages and the other area we’ve seen reflected is in transportation costs. They represent the vast majority of our inflationary pressures. We chose to absorb a significant portion of it in the short term,” Dunn said.
“We believe that eventually some of these transportation costs will reverse themselves and so we have chosen to absorb them rather than pass them on to consumers.”
However, he said the company had raised the price of some products by “low to mid figures” in early 2022.
Asos’ results highlighted how the explosion of online shopping during the lockdowns came “back to reality”, according to Matt Britzman, equity analyst at broker Hargreaves Lansdown.
“Last year’s gold loop conditions are well and truly over. It’s a pretty bleak backdrop and that means the outlook here is hard to assess with confidence,” he said. declared.
Despite Asos turning red following the easing of Covid restrictions and the reopening of stores, Dunn said he believed retail was going through “a period of realignment”, but shopping online continued to represent a higher proportion of consumer spending than before the pandemic. .