Asos profits nosedive 68 percent on warehouse issues
By Prachi Singh
16 Oct 2019
For the year to August 31, 2019, Asos plc reported 68 percent decrease in profit before tax to 33.1 million pounds (42.2 million dollars) after transition costs of 45 million pounds reflecting a substantial amount of one-off costs in support of warehouse transitions. The company also incurred 5.5 million pounds of restructuring costs. Asos said that basic and diluted earnings per share decreased by 70 percent to 29.4p driven by the decrease in profit before tax during the year. Asos added that revenues at 2.7 billion pounds (3.4 billion dollars) rose 13 percent or 12 percent on a constant currency basis but conversion remained flat, in part impacted by the warehouse transition issues.
Commenting on the full year trading, Nick Beighton, the company’s CEO, said in a statement: “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. But with over 60 percent of our revenue coming from international customers and a strong global logistics platform with capacity to grow, we are well positioned to take advantage of the global growth opportunity ahead of us.”
Highlights of financial performance of Asos
In FY19, Asos saw over 72 million orders, an increase of 14 percent on the previous year with visits to the site growing by the same amount. Active customer database grew by 10 percent with active customer base now over 20 million. Gross profit increased 8 percent, with gross margin down 240 bps versus the prior year.
The company’s UK retail sales grew by 15 percent in the year, despite an increasingly competitive market, while total UK customer base grew 7 percent in the year and conversion was strong, up 40bps. The company added that EU retail sales grew 12 percent or 9 percent in constant currency, below expectations as operational challenges following Euro Hub automation impacted stock availability. As a result, conversion stepped back 10bps. Orders growth improved in P4 as trading stock increased and is reflected in P4 sales growth of 17 percent. Despite the operational challenges, active customer base improved by 10 percent.
US retail sales grew by 9 percent or 4 percent impacted by operational challenges reflecting the move for customers from the Barnsley warehouse to the newly commissioned Atlanta warehouse in February of this year and lower availability of some key products. However, total active customer base in this region grew 12 percent in the year to 2.8 million. Rest of the world retail sales grew by 12 percent or 14 percent in constant currency with particularly strong growth in Russia and the Middle East. The company said that changes to promo calendar and proposition supported a recovery in sales and momentum after a poor peak period performance in P1 and the remainder of the year saw visits growth of over 20 percent in P2 to P4, resulting in full year visits growth of 19 percent and orders growth of 15 percent.