Asos says investment to hold back profit in 2014-15

Online fashion retailer Asos cautioned significant investment would prevent profits from growing in 2014-15, after sales slowed again in the fourth quarter of the year just ended.

The firm, which issued a profit warning in June and also suffered a fire at its main warehouse, said on Tuesday the 2014-15 year would see significant investments in its international pricing and proposition, as well as in its logistical infrastructure and technology platform.

Asos said retail sales increased 15 per cent to £240 million in the three months to August 31st, its fiscal fourth quarter.

That compares with a third quarter rise of 25 per cent.

UK retail sales increased 33 per cent, having been up 43 per cent in the third quarter, while international sales increased 6 pe rcent, having been up 17 per cent previously.

International sales represented 59 per cent of total sales.

Fourth quarter gross margin fell 640 basis points.

Asos said the fire at its Barnsley distribution centre in northern England cost it sales during the quarter of 25-30 million pounds with a retail gross margin impact of about 200 basis points. It is insured for the losses.

Prior to the update analysts’ were forecasting a consensus pretax profit for the 2013-14 year of £45 million, down from £54.7 million in 2012-13.

"We remain focused on the long term opportunity for Asos, with £2.5 billion of sales as our next staging post," said chief executive Nick Robertson.

Asos warned in June that profit for 2013-14 would miss its then forecasts by 30 per cent as the strength of sterling caused a slowdown in international sales growth. The fire disrupted trade and further damaged sentiment.

The former darling of the retail sector had first spooked investors in March when it announced plans to increase spending on infrastructure to meet future demand, at the expense of short-term profits.

Up until this year Asos had been the great success story of British retailing. Having floated at just 20 pence in 2001 its shares hit a high of 7,195 pence in February.

But its shares have fallen 62 per cent over the last six months, closing at 2,422 pence on Monday, giving a market capitalisation of £2 billion.

Reuters