Asos warns on profits amid ‘significant increase’ in customer returns

Asos has warned profits will be sharply lower than previously expected as cash-strapped customers hit by rising inflation return more items to the online fashion retailer.

The warning, which was given in an unscheduled trading update, prompted a sharp sell-off of Asos shares which hit a 12-year low.

The retailer said that it was seeing a “significant increase” in returns in the UK and Europe, which it warned would have a “disproportionate impact on profitability.”

Mat Dunn, chief operating office, 说: “What is now clear, based on the significant increase in returns rates that we have seen, is that … inflationary pressure is increasingly impacting our customers shopping behaviour.”

It said the cost of living crisis had forced customers to pull back on spending and return more items, in order to cover rising household energy bills and food.

Asos added that uncertainty over how shoppers would behave in the coming months had forced the company to lower its profit forecasts to between £20m and £60m for the full year. That is a significant drop from previous forecasts, when Asos said it expected annual profits to total between £110m and £140m. Asos made a £194m profit last year.

Shares in the company plunged nearly 27% after the update on Thursday to a 12-year low of 851p.

The retailer said the forecasts reflected the impact of the higher number of returns on warehousing and delivery costs, as well as the fact it would be forced to slash prices of returned items, and assign staff to clearing the returned stock.

“It is too early to tell for how long the current pattern of customer behaviour will continue but we are taking swift and decisive steps to minimise the impacts,” Dunn said.

The profit warning comes after rival online retailer Missguided called in administrators last month after being issued with a winding-up petition by clothing suppliers who are owed millions of pounds.

Online retailers such as Asos and Missguided enjoyed rapid growth during the pandemic when shoppers were forced to shop online and were saving money usually spent on commuting, travel and restaurants. 然而, those same companies have struggled as physical stores reopened and inflation put pressure on consumer finances.

Another rival, Boohoo, said that while revenues fell 8% in the three months to May, the rate of returned items was normalising and that net sales, which reflect the level of returns, had improved in the UK.