Asos shares collapse after warehouse problems have affected their profits

Online fashion retailer Asos has announced that its annual profits will be 46% lower than expected after the botched rollout of new warehouses, which has limited the stock available to buyers, reducing stock by nearly a quarter.

The group said Thursday that it expects a pre-tax profit of 30 to 35 million pounds in 2019. Analysts surveyed by FactSet expected a profit of 55.7 million pounds sterling. It also announced transition costs of £ 47 million and restructuring costs of £ 3.5 million.

The latest earnings warning is a blow to the retailer, whose share price has fallen over the past two years after slowing its previous growth record, shrinking margins and continuing heavy spending in fixed badets.

While sales in the UK and Ireland remained strong in the four months to end of June, operations in continental Europe and the United States have been hampered by operational problems related to new storage facilities in Berlin. and Atlanta.

In a stock market update, Asos admitted that its expectations for new facilities had been "ambitious" and that the failures had led to lower sales growth in both key markets.

In Berlin, the company had trouble using new automation software, unable to handle the volume of stock it should handle, while in Atlanta, the group was struggling to build a stock.

"This has limited the availability and range of products for our customers in these territories and we have seen a corresponding impact on sales as well as additional costs in support of the transition," Asos said.

"The UK's performance is relatively robust, but it's clear that the warehouse transition in Europe and the US has been marked by significant growth difficulties in recent months, which we believe have been self-inflicted. by the company, "said Shore Capital badysts.

The group said it foresaw that the lack of available inventory would continue to affect growth levels for the rest of the year.

"We are well aware of the root causes of the operational problems we have encountered, we are making progress in their resolution and we plan to complete these projects by the end of September," said General Manager Nick Beighton.

Total sales growth over the period was 12%, while revenues increased 12% to 919.8 million pounds.

Shares fell 22% at the start of trading in London.