10th Apr 2019 08:29
LONDON (Alliance News) - ASOS PLC on Wednesday reported a significant profit drop for the first half of its financial year, despite UK sales outperforming a highly competitive retail market.
For the six months to February 28, the online fashion retailer posted pretax profit of GBP4.0 million, 87% lower than the comparative period a year ago at GBP29.9 million.
This was due to GBP24 million of temporary transition costs, the retailer explained. Furthermore, distribution expenses increased to GBP639.9 million from GBP569.4 million, while administrative costs jumped to GBP430.5 million from GBP361.2 million.
"Our performance across the first half has been disappointing and we are capable of achieving more. Whilst delivered against a challenging market backdrop, our performance was undoubtedly impacted by the large scale transformational projects we have been undertaking and some of the choices we made on short term pricing, marketing and inventory to manage the business through this period," ASOS said.
At a group level, revenue rose 14% to GBP1.31 billion from GBP1.15 billion a year ago, driven by a 13% jump in retail sales.
In the UK, the retailer's home market, retail sales increased 16% to GBP481.5 million from GBP414.5 million a year ago. Order growth in the county was 20% from a 4% increase in traffic, while active customer growth rose 13% year on year.
However, ASOS said that the rate of customer acquisition was behind expectations in the first half of the year, especially due to slower acquisition amid younger customers.
EU sales rose 10% in the half, behind ASOS' initial plans, the retailer said. This was largely due to weakness in the German and French markets.
In the US, sales growth at 4% also lagged behind the fashion retailer's expectations, due to issues at the company's Atlanta warehouse. The facility after launching online in February was not staffed to cope with demand, which exceeded expectations. Operations have now returned to plan, ASOS added.
In Rest of the World, sales grew 9% driven by strong performance in Russia and the Middle East.
Looking ahead at the rest of the financial year, ASOS left its guidance unchanged as it remains "confident of a stronger performance in the second half".
ASOS shares were trading up 2.4% at 3,226.00 pence each early Wednesday morning.
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