Asos warns on profits after promotions and sales mix hit margins

Asos chief executive Nick Robertson said the strengthening sterling resulted in a slow-down in its international sales, and that the resulting higher mix of UK and European sales has contributed to Asos reducing its full year EBIT margin guidance to about 4.5% from 6.5%.

Robertson added that lower retail margins in the three months to May 31, “together with increased levels of promotional activity”, will also have an impact on the full-year outcome. Retail gross margins were down about 370 basis points in the quarter.

Robertson said: “Whilst our profit performance for this financial year is not what we had hoped for due to an unusual combination of factors, our accelerated investment in technology and infrastructure to support our £2.5bn sales ambition is progressing and capex remains within guided levels.

“All customer metrics - active customers, new customers, order frequency and units per basket - are positive and we are totally focused on rolling out the Asos business model globally as the world’s leading online fashion destination for 20-somethings.”

Retail sales surged 25%, with the UK up 43% and international up 17%. Overseas sales accounted for 62% of total revenue, down from 67% last year.

Asos said it had 8.6 million active customers at May 31, up 32% year on year.

It added it has a “strong” balance sheet and cash position.