June 27, 2022

Image credit: PopBuzz

Asos shoppers return more as rising prices hit

Asos has forecasted a steep drop in full-year profits as cash-strapped customers return more items to the online clothing store.

According to the company, sales rose in the three months running up to the end of May, but profitability was hit by “consumer inflationary pressures.”

Asos’ chief operating officer, Mat Dunn, said it was “too early” to predict how long the behaviour would continue.

However, adjusted pre-tax earnings are expected to fall by £20 million to £60 million, according to the business.

It’s a lot less than Asos forecast in January when it said annual earnings would be between £110 million and £140 million, and it’s a lot less than the previous financial year when they were £193.6 million.

According to Asos, the higher return rate is increasing warehouse and delivery expenses. It stated earnings would suffer if it had to decrease prices to move items.

Asos reported a 4% increase in revenues to £987.9 million in the three months ending May 31, owing to strong performance in the United Kingdom and the United States, as well as the resolution of supply chain challenges that plagued the company in the first half of the year.

According to the corporation, “this resulted in an increased stock profile, as well as higher newness and availability.”

Following the announcement, Asos’ stock dropped 15% to a 12-year low of 987.5p.

N Brown, an online clothes store, also noted that rising inflation, which hit a 40-year high in April, has harmed consumer confidence since the start of the fiscal year when sales decreased by 2.1 per cent to £165.1 million in the first quarter.

“Sales volumes have been weaker since the beginning of the financial year, reflecting several well-documented challenges to consumer confidence that show no signs of abating in the near term,” said N. Brown’s CEO Steve Johnson.

“We expect the trading environment to remain difficult as long as these pressures persist, and we will continue to take steps to mitigate the effects where we can.”