Despite a 26 % turnover increase in the third quarter, British online clothing store Asos has lowered its profit forecast for the remainder of the year. Growing promotional costs, lower margins and mostly a strong pound have impacted the e-tailer.
UK up 43 %, Europe up 42 %
It would be an exaggeration to state that British internet giant Asos is in trouble as its total retail turnover for the third quarter rose 33 % - at stable exchange rates - to 242.96 million pounds (nearly 298.5 million euro), according to an interim trading update.
Asos performs very well in its home market, Great Britain, and in Europe, with turnover increases of 43% and 42 %. The total turnover growth is still slightly lower than in the first six months of the year, but these results are still the envy of plenty of retailers.
Strong pound hindrance to Asos
CEO Nick Robertson still felt the need to send out a profit alert, as the company was forced to spend more in marketing to get more sales. In that sense, mostly articles with lower profit margins sold more. On top of that, the international activities struggled because of a strong pound: at stable exchange rates, the turnover growth would have been 28 %, but at actual exchange rates, it was a mere 17 %.
"[This] leads us to reduce our EBIT margin guidance to c.4.5 % from c.6.5 % for the current fiscal year," he said. He emphasized that all "customer metrics" (active customers, new customers, order frequency and units per basket) are positive."
The last part of the message was not something investors cared for as they focused on the profit alert and sank the share 44 %, the biggest drop since it came to the stock exchange in 2001.