Apr 2, 2014
ASOS profit falls on expansion costs
Apr 2, 2014
LONDON, England- British online fashion retailer ASOS posted a 22 percent fall in first half profit, reflecting its move to step-up the pace of infrastructure investment to meet future demand.
The firm, whose celebrity fans include United States First Lady Michelle Obama and singer Rita Ora, said on Wednesday it made a pretax profit of 20.1 million pounds in the six months to February 28, down from 25.7 million pounds in the same period last year.
The outcome was in line with guidance issued on March 18 when ASOS warned that accelerated investment in warehousing in the UK and Germany to give the firm a sales capacity of 2.5 billion pounds, as well as start-up costs in China, would hit annual profit.
ASOS said the extra costs would be disproportionately borne in the first half, resulting in a likely first half/second half pretax profit split of 30 percent/70 percent.
At the time it guided to a full-year pretax profit of about 65 million pounds.
Shares in ASOS fell up to 22 percent on the day of the profit warning, though they later recovered to close down 8 percent.
They closed Tuesday at 5,154 pence, still up 54 percent over the past year and valuing the business at 4.3 billion pounds.
"This increased pace of investment has reduced our profitability in the period, but will deliver significantly increased capacity as well as efficiencies in the longer term," said Chief Executive Nick Robertson, who owns 9.3 percent of ASOS's equity.
"ASOS is not and has never been about the short-term; the scale of the global opportunity remains as exciting as ever," he added.
Half year revenue rose 34 percent to 481.7 million pounds, as the firm ended the period with 8.2 million active customers, up 36 percent. Retail gross margin increased 60 basis points.
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