21st Oct 2014 06:53
LONDON (Alliance News) - Online fashion retailer ASOS PLC Tuesday reported a drop in pretax profit in its last financial year, as expected, due to heavy investments and sterling strength, and said it has started looking for a new chief financial officer after current CFO Nick Beighton moved to becomes chief operating officer with immediate effect.
The retailer, which has been hit by a growth slowdown after several years of rapid growth and expansion, said Beighton will add retail and international to his responsibilities in his new role, on top of his existing responsibilities for finance, IT, supply chain and logistics.
"Nick's expanded role will free up Nick Robertson, chief executive officer, to focus on the company's growth strategy, customer experience and marketing. The company has started a search for a new chief financial officer to strengthen the overall management team," the company said in a statement.
In a separate statement, the retailer reported a pretax profit of GBP46.9 million for the financial year ended August 31, down 14% on its GBP54.7 million pretax profit it reported a year earlier.
"We are in a period of major investment that comes at a short term cost, but the medium-term benefits will be significant. As a result, we've had to manage a number of factors including disruption from significant investment in our warehousing, the launch of our new business in China, the strengthening of the pound and the fire at our Barnsley warehouse in June, all of which combined to reduce profits by 14%," said CEO Nick Robertson in the statement.
The company's full year gross margin was down 210 basis points.
Revenue for the year grew by 27% to GBP975.5 million, up from GBP769.4 million as UK retail sales grew by 35% and international sales grew 22%.
"Despite all that happened this year... our customer engagement was exceptionally strong, with highest ever average order frequency, conversion and average basket size, and we exited the year with 8.8 millon active customers, an increase of 25% over last year," said Robertson.
Last month, the retailer issued its second profit warning in just six months, stating that its pretax profit for the financial year just ended would be around GBP45 million, with profit growth stunted in 2015 too due to heavy investments.
Chief Executive Nick Robertson put the falling profits down to several factors - a shift in sales from overseas to the UK, a slowdown in international growth, sterling strength and heavy discounting.
The retailer also faced misfortune earlier this year, when a fire broke out at its warehouse in Barnsley, wiping off as much as GBP30 million of potential sales in the final quarter.
Besides higher promotional activity, more sales growth from the UK and Europe rather than higher-margin international markets such as Australia, Russia and Asia is also a problem for the retailer.
ASOS said it is currently investing in pricing to bring back international sales, especially in Australia, where a strong British pound has pushed up the price of its goods.
Analysts believe that while earnings in the short term will be hit by the step-up in investment required over the coming years to counter the appreciation of sterling, ASOS still offers a good long term growth story.
"We remain confident that the ASOS proposition - a targeted demographic, fashion credibility, quality own-brand, content, range of 3rd-party brands, and investment in delivery offer - is sufficiently differentiated to support significant long term profitable growth," analysts at Numis said in a recent note.
Analysts were expecting ASOS to report anything from GBP978 million to GBP997 million in revenue for the year, with a pretax profit of just over GBP44 million.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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