Asos suffered a fresh share price collapse after the online fashion retailer blamed IT chaos in its overseas warehouses for a second profits warning in seven months.
Analysts said investors were losing confidence in the former stock market star after a disastrous IT upgrade in Germany and stock problems in the US. The company has lost 60% of its value after a profit alert in December and another update in March when it first confessed to teething problems in America.
Nick Beighton, the Asos chief executive, said the company now expected to make profits of £30m to £35m this year, far below City forecasts of £55m and only a third of the £102m it reported in 2018.
Beighton said: “The major overhaul of our infrastructure has been bumpier and taken a lot longer than we originally anticipated. We acknowledge that this is a failure in execution.” He insisted the problems would be resolved by the end of September.
The profit warning sent the shares plunging by more than 20% initially but they later recovered to £22.79, still down by almost 17%. In March, the shares were changing hands for £77.30.
Asos said overall sales were up 12% in the four months to 30 June. However, growth in the US and EU was lower than expected, at 12% and 5% respectively, due to the operational failures. Sales in the UK – which are handled by a warehouse in Barnsley, South Yorkshire, that was unaffected – were stronger, up 16%.
The problems were different in Germany and the US: its two-year old warehouse in Berlin was affected by the switch from processing orders manually to new automated systems while its new Atlanta site – which opened in February – had stock shortages as clothing brands struggled to get their products into the country fast enough.
“These issues have restricted product choice and availability for our customers in the US and Europe which has a corresponding impact on sales growth in these regions as well as profitability in the form of higher transitional costs to fix the issue,” said Beighton.
Liberum analyst Wayne Brown described it as “another significant profits warning” and said management had “serious questions” to answer: “The operational issues in Europe and the US signal to us a lack of enough senior leaders in the business with the adequate skill-set to undertake the complex capital projects.”
Brown said £700m had been invested its Asos’s warehouses over the last four years and although sales had doubled, profits were going backwards. “We question where £1.5bn of additional sales have gone considering profits are now £20m lower than in 2015.”
Asos insists its current problems are self-inflicted and short-term and that the future remains bright for the retailer as fashion sales move online. “None of these (issues) change the opportunity ahead for us which remains huge,” said Beighton. “I’m clear this is not a demand issue.”
Independent retail analyst Nick Bubb said there was a “growing management credibility problem” at the company but suggested that investors would see how Beighton handled the key Black Friday online sales event before calling for his head.