Asos hit as rising prices see shoppers return more

Image source, Reuters

Asos has warned that full-year profits will fall as customers return more items.

In the three months to the end of May, the company said that profit had been hit by inflation.

It's too early to tell how long this behavior will last, according to Asos's chief operating officer.

The adjusted pre-tax profit is expected to fall.

In January, Asos said its annual profit was set to reach between $110m and $140m, and that it would decline from the previous year's £193.6m.

The higher rate of returns adds to warehouse and delivery costs. If it had to cut prices, it would have a negative impact on profit.

In the three months to May, Asos said sales rose by 4%, driven by the UK and the US, as well as the resolution of supply chain issues which had hampered its performance over the first half of its year. This resulted in an improved stock profile.

"Based on the significant increase in returns rates that we have seen, it is clear that this inflationary pressure is impacting our customers' shopping behavior."

The share price of Asos plummeted to a 12-year low.

N Brown's sales fell in the first quarter of the financial year due to rising inflation, which reached a 40-year high in April

"Sales volumes since the start of the financial year have been softer, reflecting various well-documented pressures on consumer confidence, which are showing no signs of abating in the short-term," said Steve Johnson.

We expect the trading environment to remain challenging and will continue to take actions to mitigate the effects wherever possible.