Online fashion retailer Asos has warned that ongoing supply chain problems and higher costs in the clothing sector will hit its profits over the coming year.
It said that it faced “global supply constraints” as well as rising costs, predicting that these would mean that adjusted pre-tax profit would fall by between £110 million and £140 million for its next financial year to August 2022.
In its statement, it warned: “Industry-wide supply chain pressures [are] expected to continue throughout H1 [the six months to the end of February 2022], resulting in longer lead times and constrained supply from a number of our partner brands.
“We anticipate notable cost headwinds, particularly in the first half, from higher inbound freight and outbound delivery costs. We also anticipate inflationary pressures particularly with respect to labour across the year.”
It added that it hoped that “global supply chain pressures alleviate somewhat” in the second half of its financial year, from March to August 2022.
With its online model, Asos benefited from high-street stores being shut during lockdowns and consumers spending more time at home, reporting pre-tax profits up by 25% to £177 million in the year to the end of August.
Sales grew by 22% across the year in all its markets, mainly in the first half when the UK was in lockdown from November until the spring. In the UK alone, annual sales grew 36% to £1,652 million.
In its statement, Asos said: “Many of these restrictions were removed in the second half, but our consumers were still largely unable to participate in activities that drive demand for fashion.
“As a result, although we saw increased demand for event-led product, with “going out” wear a higher proportion of our mix in the second half of the year, the mix of this product still remains well below pre-pandemic levels.”
The company added 1.4 million new customers during the period. It also acquired four former high-street brands – Topshop, Topman, Miss Selfridge and HIIT – which hit its online platform in February.
It provided an update on its integration of Topshop’s 135 suppliers, revealing it had identified 55 suppliers who would be “exited in a responsible timeframe”, with the final supplier base expected to consist of 80 suppliers, many of whom have not worked with Asos before.
Despite the rises in sales and profits, Asos CEO, Nick Beighton, announced his resignation after 12 years.
Mat Dunn, chief operating officer and chief financial officer, said: “Looking ahead, while our performance in the next 12 months is likely to be constrained by demand volatility and global supply chain and cost pressures, we are confident in our ability to capture the sizeable opportunities ahead.”
With garment retailers facing scrutiny over the impacts of “fast fashion” on the environment, Asos expanded on its ESG (environmental, social and governance) commitments announced at the Fashion with Integrity Capital Markets Event in September.
Its Fashion with Integrity 2030 programme is aimed at minimising Asos’ impact on the planet, delivering positive benefits for the people who work in fashion and meeting increasing demand from customers for greater choice in “responsible fashion”.
Initiatives include ensuring there is no modern slavery throughout its supply chain, the Fast Forward auditing programme for tackling issues in UK manufacturing, circular design strategies to reduce textile waste, cutting operational carbon emissions and using over 80% recycled material across mailing and garment bags.
