Asos issues profit warning following challenging November

For the first three months of the financial year, Asos Plc said that although the company delivered growth in sales of 14 percent, it experienced a significant deterioration in the important trading month of November and that the conditions remain challenging. As a result, Asos has reduced its expectations for the current financial year.

The company now expects sales growth of 15 percent compared to previous outlook of between 20-25 percent, retail gross margin to decline by 150bps against previous guidance of flat at 49.9 percent and EBIT margin to rise by 2 percent compared to previous 4 percent increase.

Conditions remain 'challenging' at Asos

Commenting on the trading update, Nick Beighton, the company’s CEO, said in a statement: “We achieved 14 percent sales growth in a difficult market, but in the light of a significant downturn in November, we think it’s prudent to recalibrate our expectations for the full year. We are taking all appropriate actions and our ambitions for Asos have not changed.”

Total sales for the period grew by 14 percent on a reported basis and 13 percent on a constant currency basis to 656 million pounds. Retail gross margin was 160bps. In the UK, Asos grew sales by 19 percent to 237.1 million pounds, which the company said were achieved at the cost of more promotional activity than initially planned and consumers buying into lower priced product.

In the EU, sales growth across this segment was 18 percent or 14 percent on constant currency to 203.8 million pounds. Sales in the US rose 13 percent or 11 percent constant currency to 85 million pounds. In the company’s ROW segment, revenues declined by 3 percent or 2 percent at constant currency.

The company also expects negative impact of high level of discounting and promotional activity on the company’s profitability during the second half of the current financial year.

Picture:Facebook/Asos