(Alliance News) - Online fashion retailer ASOS PLC on Wednesday admitted it made a mistake in embarking on a "huge" logistical spending plan which has led to a slump in annual profit.
Pretax profit for the 12 months to August 31 fell 68% to GBP33.1 million, despite revenue rising 13% to GBP2.73 billion. At constant currency, revenue was up 12%.
ASOS's UK retail sales climbed 15% to GBP993.4 million, with international climbing 11%, or 10% constant currency, to GBP1.66 billion.
ASOS issued two profit warnings during the year, the first in December after a "significant downturn" in performance during November 2018, and then another in July after warehouse problems in Atlanta, US, and in Berlin.
Shares in the AIM-listed company closed at 2,560 pence each on Tuesday in London. At the start of December 2018, prior to the first warning, they were around the 5,000p mark.
ASOS said Wednesday the financial and operating performance was "disappointing", with the "huge" investment made more challenging than predicted.
"The transformation has been huge and we underestimated the impacts of large scale operational change being executed on two continents simultaneously. With the benefit of hindsight, we were not adequately prepared for the additional complexities of planning and trading across our expanded warehouse footprint," said the company.
"It is also clear our internal capabilities had not kept pace with this growth and change in complexity, and accordingly we lost focus on several of our core competencies, notably product, presentation and customer engagement."
Distribution expenses climbed 9.1% to GBP415.6 million, with administrative expenses rising 17% to GBP883.6 million. Cost of sales was up 19%, ahead of revenue growth.
"This financial year was a pivotal period for ASOS, where we have invested significantly and enhanced our global platform capability to drive our future growth. Regrettably this was more disruptive than we originally anticipated," said Chief Executive Nick Beighton.
"However, having identified the root causes of our operational issues, we have made substantial progress over the last few months in resolving them. Whilst there remains lots of work to be done to get the business back on track, we are now in a more positive position to start the new financial year."
Looking ahead, ASOS said it ended the year in a better position that it started it in, and though "mindful" of consumer uncertainty and a "poor" retail environment in some markets, it is confident on a better performance in its new financial year.
By George Collard; georgecollard@alliancenews.com
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ASOS (ASC)
