A second profits warning in three months saw ASOS’ value plummet by more than £1bn last week as investors voted with their feet and made a swift exit. A strong £ was the primary reason given by the ASOS board for the reduction in forecast profits from 6.5 per cent to 4.5 per cent. With over 60 per cent of ASOS sales now generated overseas, customers impacted by the fall in the value of their own currencies against the £ were facing price increases of as much as 25 per cent. ASOS chose to offer discounts to affected customers, absorbing the cost, rather than lose the orders, incurring questions from investors and opinion formers about its abilities to manage its margins. CEO Nick Robertson maintains that the business will continue with its ambitious international expansion plans despite the set-back.
For the three months to 31st May 2014 the business grew its sales by 25 per cent, with the UK up by 43 per cent and international up by 17 per cent. International sales accounted for 62 per cent of all sales and the business had 8.6 million active customers as at 31st May 2014, up 32 per cent year on year.
Nick Robertson, CEO, commented “Retail sales for the quarter were strong with particularly strong growth in the UK of 43 per cent. However, Sterling’s continued strengthening has resulted in a slowdown in our international sales growth. The resultant higher mix of UK and European sales, with lower retail margins, together with increased levels of promotional activity, leads us to reduce our EBIT margin guidance to c.4.5 per cent from c.6.5 per cent for the current financial year.”
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