Online retailer Asos has seen half year profits tumble, due to expansion costs along with heavy discounting.
Pre-tax profits dropped 87% to £4m, the retailer blamed “temporary transition costs.”
In the six months to 28 February, the group sales grew to 14% or 12% as constant currency to £1.3bn and UK sales were up by 16%.
Boss Nick Beighton said, “We have identified a number of things we can do better and are taking action accordingly. We are confident of an improved performance in the second half and are not changing our guidance for the year.
“We are nearing the end of a major capex (capital expenditure) programme.
“Whilst this has inevitably involved significant disruption and transition costs, the global capability it now provides us gives us increased confidence in our ability to continue to capture market share whilst restoring profitability and accelerating free cash flow generation.”
George Charles from money-saving website www.MoneySavingHeroes.co.uk said, “Day after day we see bad news regarding the high street, but these figures show that the problem is much more wide spread and crosses over to online brands. It’s likely that one of the main contributing factors is the ‘pay later’ option they’ve introduced. Consumers can get a high volume of clothes delivered to them to try before they buy, leaving Asos temporarily in a spot where they have no product or money in the bank.
“It’s good to hear that ASOS have a plan in place for serial returners and will ban accounts that are caught doing it all the time. However, they need to consider their plan of action; it’s not the sort of site where they can consider issuing credit notes, people are going to want their money back for the items they no longer wish to keep.
“ASOS are quite often lorded for showing great initiative in the fashion retail industry and they will continue doing just that. We fully expect that they will be fine and recover well from this issue, but it does show consumers that online retailers aren’t invincible, and these issues aren’t solely reserved for physical stores on the high street.”