Asos has warned of slowing sales growth and increased costs related to Brexit and global supply chain problems after reporting a rise of more than a fifth in the first quarter of the year.
The company reported revenues of almost £1.3bn for the four months to 30 June, up from £1.1bn in the same period last year.
However, it said sales softened in the last weeks of June amid uncertainty over the easing of Covid-19 restrictions, which put a question mark over its shoppers’ holiday plans, and unseasonal weather.
The fashion company, popular with twentysomethings, said it expected trading volatility to continue in the near term as the impact of Covid-19 on its supply chains and freight costs continues to dampen profits.
Although the company said it still expected to meet annual profit expectations, shares closed down 18%, wiping about £750m off its market value and taking it to its lowest level in almost a year.
The group said the costs of shipping product from China had risen ten times over and flying product around the world was also more expensive because there were fewer planes in the air.
That added to problems caused by Brexit, which had not only added to costs but also added a fortnight to the time it took to move product between the UK and Europe. As0s said this was affecting delivery times for shoppers and making it harder to respond to changes in demand.
Nick Beighton, the chief executive of Asos, said the price tag for shoppers had not risen as Asos had “invested heavily” in keeping prices low and would “continue to do so.”
The company, which more than tripled first-half profits in the six months to the end of February to a record £106m, has enjoyed the benefit of an accelerated shift from bricks and mortar shopping to online retail shopping during the coronavirus pandemic.
Beighton said the company would need to be “mindful of the continued impacts of the pandemic on our customers in the short term”, but added that the pandemic would still benefit online retailers over the long term.
“We believe that the structure of the global e-commerce fashion market has changed for ever, which will drive an increase in online fashion sales over the long term,” he said. “We’re excited about the size of the prize ahead of us and the opportunity of delivering on our ambition of being the No 1 destination for fashion-loving twentysomethings.”
He said a new tie-up with US department store Nordstrom, which will distribute Asos brands including Topshop, Miss Selfridge, As You and Asos Design in both its stores and online, was intended to be an “operating model” for partnerships elsewhere.
“Once we are happy with what we build there it is conceivable we will look at doing that elsewhere,” he said.
However, Beighton said there were no current plans to return the Topshop brand to the UK via such a model.
Beighton said Topshop sales had more than doubled since Asos took ownership of the brand, previously owned by Sir Philip Green’s collapsed Arcadia Group, in February. The brand has proved most popular in the US, Germany and the UK.
The UK is Asos’ biggest market, generating underlying sales of more than £526m over the last quarter, up 36% on the same period last year. In the EU, sales topped £388m, up 15% from last year.
Asos said sales were “particularly pleasing” in Germany, despite Covid-19 restrictions remaining in place for much of the period, but in southern Europe the market was more challenging due to a slowdown in the region’s tourism industry which had affected the prospects of twentysomethings. US sales grew a fifth to £144.8m.
