Asos warns on profit as it invests in back end

Asos has warned that increased investment into warehousing and IT, combined with start up costs in China, will hit its earnings over the first half.

The company said it has accelerated spending on warehouses and IT and will spend at least £68 million this year, compared with a previous guidance of £55 million.

Over the first half, retail sales jumped 34% to £481.7 million. In the UK, sales grew 32% to £182.04 million. In the US, sales grew 31% to £46.7 million, and were up 65% to £127.6 million.

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“Retail sales for the two months to February were strong in all territories except Rest of World where we experienced adverse currency movements, notably in Australia and Russia,” said CEO Nick Robertson.

“We have accelerated our investment in warehousing (both in the UK and Germany) and in IT, so that we will invest at least £68m in capital expenditure in the current year (previous guidance £55m.) This investment will increase our sales capacity to c£2.5bn per annum, over £1bn higher than previous guidance. Our investment in warehousing necessitated levels of dual running costs over the period which will ease from H2 2014/15.

“This investment, as well as the investment in our China start-up, will reduce our EBIT margin for the current financial year to 31 August 2014 to c.6.5%. This year these costs will be disproportionately borne in H1, resulting in a likely H1/H2 Profit before Tax split of approximately 30%/70%.”

The company’s share price plunged on the news, down 14.5% at 9:28 GMT yesterday.

 

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