Asos swings to interim loss

Online fashion retailer Asos said on Tuesday that it swung to an interim loss as it reiterated full-year guidance but warned over risks from inflation.

In the six months to 28 February, the company swung to a reported pre-tax loss of £15.8m from a profit of £106.4m in the same period a year earlier. Adjusted pre-tax profit slid to from £112.9m to £14.8m - broadly in line with consensus expectations - as it spent £30.6m trying to win new customers.

Asos said this reflected the expected unwind of all Covid-related benefits from the first half of the prior year and planned investment in marketing.

Group revenues ticked up 1% to £2bn, with expected supply chain constraints impacting newness and stock availability.

"In the first half of the year, supply chain disruption played out as expected with capacity constraints across both sea and air freight causing delays and inflating costs," the retailer said.

"The demand environment was also impacted by increased Covid-19 caseloads and sporadic lockdowns, particularly in Europe, along with a rebalancing of demand between online and offline channels. Despite this, Asos delivered a successful peak period, particularly in the US, and successfully launched its fourth fulfilment centre to increase stockholding and optimise availability. The scale-up of this facility has progressed more quickly than anticipated, adding incremental capacity during peak, and performing ahead of original capacity expectations."

Asos announced last month that it had suspended sales in Russia due to the invasion of Ukraine. It said on Tuesday that this is expected to reduce group revenue by 2% and profit by £14m.

The company backed its guidance for the full year but cautioned that the outlook has become less certain, and much will depend on how broader consumer discretionary spend evolves over the coming months. "This uncertainty introduces a greater degree of risk to our performance than normal," it said.

At 0900 BST, the shares were up 1.6% at 1,562p.

Matt Britzman, equity analyst at Hargreaves Lansdown, said: "Profits are heavily down at Asos as the online shopping boom seen over lockdowns comes crashing back to reality.

"Management had previously pointed to lockdown related benefits to pre-tax profit being in the region of £50m, if we remove that there’s still a decent sized gap in today’s numbers from last year - albeit an expected one.

"But that’s where the concerns lie, and it’s no surprise that supply chain issues and inflation have hurt margins, but commentary from management effectively waves a red flag on full-year expectations - guidance hasn’t been changed, but warnings of a significant increase in risks rings alarm bells and shares are down over 3% as a result.

"The broader online retail sector finds itself in somewhat of a sticky spot, with inflation at levels not seen for years the squeeze on finances will slowly start to feed into changing buying habits. When you add on the resurgence of High Street shopping and higher return “rates, the goldilocks conditions seen last year are well and truly over. That’s a pretty sombre backdrop and means the outlook from here is a tricky one to be confident about."