British online fashion retailer ASOS warned on profit for the third time in eight months on Thursday, blaming operational issues as it overhauls its warehouses in the United States and Europe.
ASOS said pretax profit for full-year 2019 was now expected to be £30-£35 million after booking £47 million of transition costs and £3.5 million of restructuring costs.
"Clearly management need to rebuild credibility in their financial guidance," said analysts at Shore Capital. ASOS, which sells fashion aimed at twentysomethings, issued a shock profit warning in December, and in March said its new US warehouse was struggling to cope with demand, hitting sales there and adding to challenges in France and Germany.
The group said on Thursday total sales rose 12 per cent to £919.8 million in the four months to June 30th, with sales in its United Kingdom and rest of world division robust, up 16 per cent and 14 per cent respectively. However, in the European Union and the United States sales were held back by operational problems at its new warehouses in Berlin and Atlanta, up 5 per cent and 12 per cent respectively.
"Embedding the change from the major overhaul of infrastructure and technology in our US and European warehouses has taken longer than we had anticipated, impacting our stock availability, sales and cost base in these regions," said Chief Executive Nick Beighton. "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."
The group said it was reducing expectations for its 2019 financial year accordingly. Pretax profit is now expected to be £30-£35 million after £50.5 million of transition and restructuring costs. According to Refinitiv data, analysts had been expecting pretax profit of £55 million. ASOS reported a profit of £102 million in 2018.
For the balance of the year, the group sees sales broadly in line with its year-to-date performance of up 13 per cent. Full-year retail gross margin is forecast to be down 250 basis points year-on-year. Capital expenditure guidance has been kept at about £200 million, but year-end net debt is now expected to be about £100 million. “Clearly the warehouse transition in both Europe and the US have seen significant growing pains in recent months, which in our view, have been self-inflicted by the company,” said the Shore Capital analysts. – Reuters
