Asos profits tumble on costs and tough market

Asos has seen half-year profits tumble as the online retailer blamed expansion costs and heavy discounting for hitting its performance.

The group saw pre-tax profits crash 87% to £4 million, which it blamed on “temporary transition costs”.

Sales grew 14%, or 12% at constant currency, to £1.3 billion in the six months to February 28.

UK sales rose by 16% and international sales by 12%.

But the firm bemoaned a “disappointing” set of figures, pointing to costs relating to adding new warehouse capacity and a high level of discounting and promotional activity across the market.

ASOS chief executive steps down
Asos chief executive Nick Beighton (Asos/PA)

Boss Nick Beighton said: “We have identified a number of things we can do better and are taking action accordingly. We are confident of an improved performance in the second half and are not changing our guidance for the year.

“We are nearing the end of a major capex (capital expenditure) programme.

“Whilst this has inevitably involved significant disruption and transition costs, the global capability it now provides us gives us increased confidence in our ability to continue to capture market share whilst restoring profitability and accelerating free cash flow generation.”

In December, the company had warned that profits were likely to be lower than expected due to a significant deterioration in trading during the lead-up to Christmas.

The announcement indicated that the company was not immune from the cyclical slowdown, caused in part by the disruptive effect of Black Friday on the usual retail calendar.

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