ASOS profits slump – BinaryOptions

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Asos profits slump on restructuring costs

Online fashion retailer Asos posted a slump in full-year profit on Wednesday as it took a hit from restructuring costs.

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In the year to the end of August 2020, pre-tax profit fell 68% to £33.1m even as revenue rose 13% to £2.7bn. Analysts had been expecting pre-tax profit of £31m.

Asos, which said its performance had been “disappointing”, attributed the decline in profit to “a number of transitional impacts from the logistics transformation programme and warehouse implementations undertaken in the year”. The company had already warned in July that full-year profit would be between £30m and £35m, falling short of analysts’ expectations of £55m.

UK retail sales were up 15% to £993.4m and international retail sales were 11% higher at £1.7bn.

Diluted earnings per share slumped 70% to 29.4p, gross margin was down 240 basis points to 48.8% and the retailer said it swung to net debt of £90.5m versus net cash of £42.7m the year before.

Chief executive officer Nick Beighton said: “This financial year was a pivotal period for Asos, where we have invested significantly and enhanced our global platform capability to drive our future growth. Regrettably this was more disruptive than we originally anticipated. However, having identified the root causes of our operational issues, we have made substantial progress over the last few months in resolving them.

“Whilst there remains lots of work to be done to get the business back on track, we are now in a more positive position to start the new financial year.”

Asos said the majority of its transformation programme was now behind it and it ended the year in a better position than it began, having made a “solid” start to FY20.

At 0940 BST, the shares were up 17% to 2,998p.

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Richard Hunter, head of markets at Interactive Investor, said the contrast with the full-year numbers this time last year was striking.

“At that time, Asos was celebrating pre-tax profits growth of 28%, improving gross margins and early signs of encouragement with its international expansion ambitions,” he said.

“What followed was a year which the company would rather forget. The company had bitten off more than it could chew, and two profit warnings, outages at warehouses in Germany and the US not only revealed a deeper malaise but could even have brought the relevance of the brand into question. As the company saw nearly half of its market value evaporate, it needed to take drastic action to stem the decline. As a result, the reported numbers are fairly dire.”

He said investors will be hoping these numbers represent a line in the sand.

“The initial share price reaction to the results reflects a leap of faith, after management assurances that the latter part of the year was rather more positive, to the extent that it can look forward to the next period with confidence.”

Asos shares slump as it warns on profits

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Shares in Asos have sunk after the online fashion giant said that this year’s profits are likely to be much lower than expectations.

The retailer said sales growth in the US and Europe had been held back by problems at its warehouses.

These problems meant that the range of clothes available to shoppers in these markets had been limited.

As a result, it now expects to report profits of £30m-£35m this year, well below the £55m forecast by analysts.

Asos chief executive Nick Beighton said overhauling its US and European warehouses had taken longer than anticipated, affecting its “stock availability, sales and cost base in these regions”.

He added that the company was clear on what was causing the problems and was making progress on resolving them.

However, Asos said that while the warehouse problems were “short-term in nature”, it added it might take “some time” to regain customers who had been affected.

Total sales across the group rose by 12% in the four months to 30 June, Asos said, and in the UK – where trading “remained robust” – sales grew by 16%.

However, the “operational challenges” at its warehouses in Berlin and Atlanta had caused problems in the US and Europe, where sales were up 12% and 5% respectively.

‘Risk of losing out’

Asos has enjoyed rapid growth in recent years as it has benefited from the shift towards shopping online.

However, last December it surprised investors with a shock profit warning, and the company’s share price has now more than halved over the past year.

Shares in Asos opened down 20% on Thursday following the latest warning, before recovering some ground to stand 12% lower.

Analysts at Liberum said the latest warning suggested that serious questions needed answering.

“The operational issues in Europe and the US signal to us a lack of enough senior leaders in the business with the adequate skill-set in the business to undertake the complex capital projects ongoing,” they said.

Russ Mould, investment director at AJ Bell, said: “Fashion fans have plenty of places from which to buy clothes and so Asos is at risk of losing out to the competition if it cannot fix its problems fast.

“We live in an impatient world where so many people want something in an instant. If Asos doesn’t have the stock ready to ship then consumers will simply go elsewhere.”

However, Sofie Willmott, an analyst at research firm GlobalData, was more upbeat, arguing that the “changes being made to US and EU distribution centres are vital to facilitate long-term growth in these key markets”.

She added that the future “remains bright for Asos”.

“The retailer’s agility and willingness to change to remain relevant to its customer base will help it to continue gaining market share, both at home and abroad.”

Asos shares slump as it warns on profits

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Shares in Asos have sunk after the online fashion giant said that this year’s profits are likely to be much lower than expectations.

The retailer said sales growth in the US and Europe had been held back by problems at its warehouses.

These problems meant that the range of clothes available to shoppers in these markets had been limited.

As a result, it now expects to report profits of £30m-£35m this year, well below the £55m forecast by analysts.

Asos chief executive Nick Beighton said overhauling its US and European warehouses had taken longer than anticipated, affecting its “stock availability, sales and cost base in these regions”.

He added that the company was clear on what was causing the problems and was making progress on resolving them.

However, Asos said that while the warehouse problems were “short-term in nature”, it added it might take “some time” to regain customers who had been affected.

Total sales across the group rose by 12% in the four months to 30 June, Asos said, and in the UK – where trading “remained robust” – sales grew by 16%.

However, the “operational challenges” at its warehouses in Berlin and Atlanta had caused problems in the US and Europe, where sales were up 12% and 5% respectively.

‘Risk of losing out’

Asos has enjoyed rapid growth in recent years as it has benefited from the shift towards shopping online.

However, last December it surprised investors with a shock profit warning, and the company’s share price has now more than halved over the past year.

Shares in Asos opened down 20% on Thursday following the latest warning, before recovering some ground to stand 12% lower.

Analysts at Liberum said the latest warning suggested that serious questions needed answering.

“The operational issues in Europe and the US signal to us a lack of enough senior leaders in the business with the adequate skill-set in the business to undertake the complex capital projects ongoing,” they said.

Russ Mould, investment director at AJ Bell, said: “Fashion fans have plenty of places from which to buy clothes and so Asos is at risk of losing out to the competition if it cannot fix its problems fast.

“We live in an impatient world where so many people want something in an instant. If Asos doesn’t have the stock ready to ship then consumers will simply go elsewhere.”

However, Sofie Willmott, an analyst at research firm GlobalData, was more upbeat, arguing that the “changes being made to US and EU distribution centres are vital to facilitate long-term growth in these key markets”.

She added that the future “remains bright for Asos”.

“The retailer’s agility and willingness to change to remain relevant to its customer base will help it to continue gaining market share, both at home and abroad.”

Britain’s ASOS profits slump 68% on warehouse problems

Credit: REUTERS/SUZANNE PLUNKETT

British online fashion retailer ASOS reported a 68% slump in full year profit, hurt by problems in ramping-up warehouses in the United States and Germany.

LONDON, Oct 16 (Reuters) – British online fashion retailer ASOS ASOS.L reported a 68% slump in full year profit, hurt by problems in ramping-up warehouses in the United States and Germany.

ASOS, which issued its latest profit warning in July, said on Wednesday it made a pretax profit of 33.1 million pounds ($42.2 million) in the year to August 31 – in line with July’s guidance of 30-35 million pounds but down from 102 million pounds made in 2020.

The group, whose shares have fallen 49% over the last year, said it had made “substantial progress” over the last few months in resolving its operational issues.

“Whilst there remains lots of work to be done to get the business back on track, we are now in a more positive position to start the new financial year,” said Chief Executive Nick Beighton.

($1 = 0.7836 pounds)

(Reporting by James Davey; Editing by Muralikumar Anantharaman)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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