Online fashion giant Asos has said it was hammered by reduced stock availability as it posted a £15.8m pre-tax loss for the six months to the end of February.
The company cited “industry-wide supply chain constraints impacting stock availability and ongoing Covid-19 restrictions.”
In half year results on Tuesday, the retailer posted four per cent revenue growth and £14.8m adjusted profit before tax. Revenue surpassed £2bn in the six month period to February 2022 – a first for the retailer.
Adjusted profit before tax was down 87 per cent on the year prior, when lockdown saw shoppers turn to e-commerce fashion sites in droves.
Some analysts had forecast the retailer would report mild revenue growth of 3.2 per cent.
Asos boss Mat Dunn said the retailer had delivered a buoyant trading performance “against the continuing backdrop of significant volatility and disruption.”
Once a darling of the City, the retailer has struggled with supply chain woes in recent months, with its share price down a third this year so far.
Asos said there was “greater risk in the second half of the year than normal” as retailers are yet to feel “the full impact of recent inflationary pressure on consumers and the potential impact on discretionary spend are yet.”
Asos was hopeful of a smoother second half-year, suggesting sales growth would be driven by the return of consumers shopping for events and holiday outfits.
Sales growth would also be boosted by an improved stock profile and improved lead-times as supply chain constraints ease up.
Mat Dunn added: “While much remains to be done, we have a clear plan for each of the three key pillars – our platform, consumer offer, and international expansion – and are already seeing positive signs of progress across the business. We’re confident of the benefits these efforts will create and our continued ability to deliver.
“We’ve entered the second half of the year well placed, and believe that our stock position, with increased product availability and newness, will stand us in good stead. We remain mindful of the potential impact on demand from the growing pressures on consumer spend and will continue to be responsive to any changes in market conditions as we progress the work started in the first half to deliver on our ambitions.”
With the exception of an impact from sales to Russia being suspended, Asos said its guidance remained unchanged. It previously has said it forecasts sales will grow 10 per cent to 15 per cent this year.
However, Russia and Ukraine are understood to make up four per cent of the company’s annual revenue, worth some £20m.
Shares dipped more than three per cent in early morning trading on Tuesday.
Matt Britzman, equity analyst at Hargreaves Lansdown said an online shopping boom seen over lockdown “comes crashing back to reality. “
He added: “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 three per cent as a result.”
In response to commentary from analysts that the retailer was crashing back to earth as a pandemic shopping boom had let up, Dunn told CityA.M. that there was “inevitably a realignment” with some sales now returning back to the high street.
However, he said that online sales had retained a higher proportion of total sales than compared to pre-pandemic levels.
“While I think we are going through an alignment phase at the moment in particular, it still leads us to be well set up in the long term as a business,” he added.