Asos Hit by Supply Chain Disruption, Volatile Christmas Demand

British online fashion retailer Asos reiterated its already downgraded outlook on Thursday after supply chain constraints and volatile demand limited sales growth in its four months to Dec. 31 trading period.

It posted total sales growth of 5 percent, following a 22 percent rise in the year to end August, and said gross margin decreased by 400 basis points to 43.0 percent driven by a need to discount goods and higher freight costs.

For the full year it reiterated its outlook of revenue growth in the range of 10 percent to 15 percent and adjusted profit before tax of £110 million to £140 million. That hit its shares when it was published in October, and would represent a more than 40 percent drop on the year before.

“Asos has delivered a robust start to the year, in line with the guidance we set out at full-year results, despite challenging market conditions,” chief operating officer Mat Dunn said.

Asos, once a darling of the stockmarket, was hit by a difficult end to 2021, when it cut its annual profit forecast and parted ways with its chief executive following supply chain pressures and a return by shoppers to pre-pandemic ways.

While shoppers often return partywear clothing and fashion, incurring a cost for the company, they retained the athleisure wear bought during the pandemic to use at home, giving the company a boost to its finances during lockdowns.

Its shares are down 56 percent this year, prior to Thursday’s update, mirroring similar falls seen at rival Boohoo which has also been hit by high product return rates, disruption to international deliveries and inbound freight costs.

Asos added that it intended to move to the LSE’s main stock market, expected by the end of February.

By Kate Holton; Editor: Alistair Smout

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