Asos insists a year of problems are behind it as profits drop 68%

Bosses at online fashion giant Asos have insisted the problems of the last 12 months are behind them and the business is ready to continue ramping up its global empire.

The pledge came as the company revealed a 68% plunge in pre-tax profits, with two profit warnings in the last year taking their toll.

Sales rose 13% to £2.73 billion, with revenues in the UK up 15% to £993.4 million, compared with growth of 11% for Asos’s international market. But pre-tax profits for the year to August 31 were down at £33.1 million compared with £102 million a year ago.

Shareholders appeared convinced by the message, with shares soaring 13% in early trading, up 339p to 2,899p.

Chief executive Nick Beighton said: “Asos simply didn’t look or feel as good as it should for our customers.”

Asos boss Nick Beighton
Asos boss Nick Beighton

He added: “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 it spent £221.6 million in the year upgrading and improving its infrastructure, leading to debts of £90.5 million, compared with £42.7 million in cash at the same point last year.

The main issues were focused on getting its new Eurohub up and running. Bosses insist these are now resolved and problems with stock availability in the US are almost sorted.

Asos said: “With the benefit of hindsight, we were not adequately prepared for the additional complexities of planning and trading across our expanded warehouse footprint.”

As a result, the gross profit margin was down 2.5% and there were more promotions, although Mr Beighton suggested this was in reaction to the warehouse and supply problems and may not be long term.

Other fixes include improving Asos’s social media engagement with customers and trying to tap into the next generation of young shoppers.

The company said the launch of the Collusion brand was a success, winning new customers in the 16 to 24 age bracket, as Asos attempts to win back shoppers who have headed to rival Boohoo.

Its competitor has raced ahead in the last year, overtaking Asos in value and snapping up brands including Karen Millen and Coast, keeping them as separate entities.

Mr Beighton said he had no plans for Asos to start hosting brands on separate websites, adding: “Asos has always been a multi-brand offer and believe it is the most compelling way to reach our customers.”

Despite the positive notes and eye on the future, the chief executive warned: “I think there is a very unsettled customer environmental out there. There is an awful lot of global uncertainty for the consumer.”

The executive team was also strengthened, with the company announcing plans for an enlarged c-suite of a chief growth officer, chief commercial officer, chief people officer and chief strategy officer to sit alongside the chief Executive, chief financial officer, chief information officer and chief operations officer.